Utah’s Game-changing Non-compete Law

Starting May 10, 2016, Utah non-compete agreements can only restrict employment for one year.

Employers frequently use non-compete agreements to limit where and when employees can go to work for a competitor. Previously, those limits ranged from restricting employment with a handful of employers for a year or two, to any competitor in the United States (or even the world) for years to come.

Employers view non-compete agreements as necessary to protect their businesses. Employees, by contrast, view them as a restriction on their ability to earn a living.

No matter your viewpoint, H.B. 251 is a game-changer. [1]

The new law bars any attempt to restrict employment for more than one year. In addition, should employers attempt to enforce non-competes in court, and lose, they will have to foot the employee’s entire legal bill. The move is strategic, designed to discourage employers from enforcing non-compete agreements they are not 100 percent confident in.

Equally as important as what H.B.251 changes, is what it does not. H.B. 251 does not change how courts view geographic restrictions (i.e., restrictions on where an employee can work). Employers can still restrict employees from working with certain competitors in certain markets, but risk drafting restrictions that are unreasonable or overbroad, making them liable (under the new law) for their employees’ legal bills.

Never has it been more important to have careful, well-drafted non-compete agreements. Give me a call and I will work with you to revise your current agreements or to draft new ones that protect your business, comply with H.B.251, and give you the confidence to enforce them.

[1]  H.B. 251 only applies to non-compete agreements between employers and employees. It does not affect an employer’s non-solicitation, non-disclosure, or confidentiality agreements. It does not affect a non-compete agreement when offered in connection with a mutually agreeable severance agreement made “at or after the time of termination.” It also (generally) does not affect non-compete agreements used in connection with the sale of a business.

Nathan Anderson