Non-Competition Agreements in Utah

Non-competition agreements, also known as covenants not to compete or restrictive covenants, are employment contracts used by employers to limit the ability of an employee to compete with the employer by stealing customers or trade secrets. Enforceable agreements must strike a balance between protecting the employer's legitimate business interests from an unfair competitive advantage with the employee's right to work in a field for which he or she is trained.  In general, courts decide what is considered reasonable or not reasonable by examining the type and size of the business, how long and over what geographic area the restrictions apply and whether adequate consideration, or benefit, was given the employee at the time the agreement was signed.

The Law In Utah

Utah courts have determined that restrictive covenants are enforceable if the terms are reasonable and necessary to protect certain business interests of the employer such as trade secrets, good will or extraordinary investment in the training or education of the employee. Factors considered when determining reasonableness include the hardship an agreement puts on the former employee, its effect on the general public and the restrictions placed on time, territory and activity of the former employee.

Consideration

With any contractual arrangement, both parties must be giving and receiving something of value, also known as consideration. Utah courts have determined that the offer of initial or continued employment is sufficient consideration or benefit to the employee in exchange for agreeing to not compete with the employer should the employment relationship terminate.

Reasonableness in Time and Geographic Scope

Agreements may be deemed unenforceable if a court finds that they are unreasonable in terms of duration, geographic scope and the location and nature of the employer's clientele.

Examples of non-compete agreements that Utah courts have found to be reasonable include:

  • A 2-year restriction against the former consultant of a multi-level marketing business selling food, cosmetics and essential oils.
  • A restriction with no geographic limitation where the business and clientele of the employer were nationwide.
  • A  5-year restriction against a former pharmacist/store manager from competing within two miles of the former employer.

Employers need to keep these issues in mind when asking employees to sign restrictive covenants. It is also important to know if potential new hires have a non-compete agreement with a former employer. In some cases, the new employer can be liable to the former employer if hiring the employee would put him or her in violation of the agreement. Different rules may apply to situations in which all or part of a business is being sold and a restrictive covenant is agreed to by the buyer and the seller.

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Questions & Answers: Non-Competition Agreements in Utah

In my employment agreement, there is a non compete clause that reads "Employee agrees to not solicit or accept work (either full or part time) from any past, current and or perspec...
As a member if a small professional LLC in Utah I have a non compete clause as part of our operating agreement. If our LLC is dissolved does the non compete remain in force? If a ...
A year ago I was hired by a company as their marketer, I signed a non-compete with them saying that I would not take any relationships or contacts I've made while working for them ...
I am preparing to enter a physician contract in Utah and have been researching the enforceability of physician restrictive covenants. I came across this bill from 2005: http://le.u...
I have a non-compete agreement. I live in Utah. The company willingly made an exception and let a former VP of engineering go to a competitor(they even had a meeting and announced...
I have a non-compete agreement. I live in Utah. The company willingly made an exception and let a former VP of engineering go to a competitor(they even had a meeting and announced...
Comments (12)add comment
Kim: ...
I have worked for a company as a "contracted seasonal" position. The employer was finished needing my services and terminated the seasonal position. Now, I am looking for employment in that same field and the company has told me I am held in a noncompete agreement with them for 12 months AFTER the seasonal position has ended. I have been in this field for over 20 years! Can the company keep me to this when I was never a permanent employee & the position was only seasonl?!!! I have bills to pay & I will be unable to do this if I can't find work. What can I do legally?
1

May 30, 2012
Steven Daily: ...
On its face this certainly sounds like an unreasonable non-compete, but you haven't given very much information about your first job. Perhaps you had access to very sensitive trade secrets or confidential customer lists. You also haven't said anything about the geographic scope of the non-compete. How broad is it?
2

May 30, 2012
Jake: ...
I have been employed with the same company for the past 3 years that made me sign a non-compete. For the past 2 years they have changed the comp plan to lower the pay out. Can I go to court and have my non-compete dismissed?
3

October 17, 2012
Chris: ...
I was just terminated (not for cause) by an employer who offers nationwide services and who is paying me a severance as part of a non-compete agreement. Does the fact that I was terminated and live in a right to work State have any merit in keeping my former employer from coming after me to recover the severance paid or to file suit on any new employer that hires me that is located within the vaguely defined geographic area?
4

November 16, 2012
Steven Daily: ...
Jake,
The fact that your compensation was lowered does not mean the non-compete you signed is necessarily invalid. It might be invalid for other reasons, however, as the article above explains.

Chris,
The non-compete itself should say whether it is triggered if you are terminated without cause. So read the language carefully. Being in a "right to work" state has no bearing on whether the non-compete is enforceable. Again, as the article above indicates, there may be other reasons for it to be unenforceable.

Steve Daily
LawServer
5

November 16, 2012
Rick: ...
If I have a non-compete in Utah and I sign with a California firm and move to California (where non-compete is void or illegal - http://californianoncompete.com), then I am free from my previous firm coming after me?
6

February 10, 2013
Jeremy: ...
In my employment agreement, there is a non compete clause that reads "Employee agrees to not solicit or accept work (either full or part time) from any past, current and or perspective client of ... name of company... for two years from date of employment termination or resignation at ... name of company... . This shall apply regardless of any legal theory plead or asserted by the employee or his attorney." There is no special training or trade secret associated with this company and I was laid off through no fault of mine. So this clause has no geographical boundery and may in effect prevent me from working in my field anywhere in the world for two years. Is this clause legally binding?
Thanks.
7

February 14, 2013
Ryan: ...
As a member if a small professional LLC in Utah I have a non compete clause as part of our operating agreement. If our LLC is dissolved does the non compete remain in force? If a partner in the LLC commits a breach of confidentiality can the non compete clause be voided?
8

July 10, 2013
Logan: ...
A year ago I was hired by a company as their marketer, I signed a non-compete with them saying that I would not take any relationships or contacts I've made while working for them to a competitor. Well on Monday I was abruptly terminated. Is my non-compete still enforceable? Ultimately all relationships I made where from my own efforts.
9

July 10, 2013
Joseph: ...
I am preparing to enter a physician contract in Utah and have been researching the enforceability of physician restrictive covenants. I came across this bill from 2005: http://le.utah.gov/~2005/bills...b0106.htm.

Is this still the current law?

Thank you
10

July 19, 2013
Brent: ...
I have a non-compete agreement. I live in Utah.
The company willingly made an exception and let a former VP of engineering go to a competitor(they even had a meeting and announced it).
If I were to go to work for that same competitor, would they have to waive the non-compete for me as well?
The position would not be in a competetive role (billing department which uses nothing competetive from my current job).
11

August 06, 2013
Brent: ...
I have a non-compete agreement. I live in Utah.
The company willingly made an exception and let a former VP of engineering go to a competitor(they even had a meeting and announced it).
If I were to go to work for that same competitor, would they have to waive the non-compete for me as well?
The position would not be in a competetive role (billing department which uses nothing competetive from my current job).
12

August 07, 2013

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