A non-compete agreement is a contract that prevents an employee from competing directly or indirectly with a company they work for. It is usually signed when an employee starts working and continues until after the time the employee leaves the company. What is in a non-compete agreement may vary, but they can protect a business from having employees:
While many employers would wish to protect their company from competition, they must follow some rules when creating a non-compete agreement. Utah courts have traditionally upheld that the non-compete agreement cannot last longer than twelve months after an employee leaves a company. Additionally, employers cannot place greater restraint than is “reasonably necessary” to secure the companies “legitimate interests.”
A non-compete cannot be used to trap employees at your company and keep competition out of the marketplace. Workforce mobility and open competition are important characteristics of our economy and cannot be unnecessarily hindered.
Utah’s Post-Employment Restriction Act caps the length of time that a non-compete agreement can be enforced to twelve months. Generally a non-compete that exceeds that time will be void and judges may shift attorney fees back to employers who try to enforce illegal terms. With this in mind, draft your non-compete agreement to fit within the timeline that is legally given to you.
Utah judges have emphasized tailoring the scope of non-compete agreements to not be broader than necessary. This means that you can protect legitimate business interests such as trade secrets, client lists, or confidential information, but must be sure not to overreach in what you ask to be protected. An overly broad non-compete runs the risk of being seen as unreasonable by judges and becoming unenforceable.
When drafting your non-compete, be open to alternatives. A narrow non-compete agreement can be coupled with a more strict non-solicitation agreement to prevent former employees from stealing employees or clients. These are often easier to enforce and can be more specific without the risk of becoming unenforceable.
Before hiring a new employee, request to review any existing non-compete agreements they have signed to ensure that your business is not unintentionally violating their agreement. Create policies to wall off trade secrets and avoid solicitation of previous accounts. An experienced Utah employee can oversee the hiring process to ensure you hire new employees legally and without violating their previous employers rights.
Enforceable non-competes are narrow, tied to legitimate business interests, and face time-constraints. Sumsion Business Law has experienced attorneys that can help your business draft and review non-compete agreements tailored to your business to ensure your company is protected while staying within your legal rights. Contact us today to create a plan that works for your company.