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Utah Adopts New Law for Noncompete Agreements

Almost everyone who has signed an employment agreement in the United States has most likely signed a noncompete agreement. They are agreements included in the contract that state that the employee will not work for a competitor of the employer in the event their employment is terminated for any reason. They usually include a geographical and a time requirement. For example, most such agreements restrict the employee from working for a competitor within five or ten miles of the employer for six months or a year after termination of employment.

Each state has their own laws governing employment contracts and noncompete agreements. California is the strictest and won’t uphold any noncompete agreements at all. Most courts will enforce noncompete agreements, as long as they protect only the employer’s “reasonable” business interests.

Courts recognize that employers have a legitimate business interest in their employees. They devote significant time and resources to training those employees, not to mention the trade secrets and clients those employees have access to. Noncompete agreements are a way for businesses to protect themselves from competitors who might try to poach employees, but courts will often refuse to enforce a noncompete agreement if the judge thinks it’s too restrictive.

In order to clarify what makes a noncompete agreement unenforceable, Utah’s state legislature recently passed the Post-Employment Restrictions Act. It prohibits employers and workers from signing an employment agreement with a time period longer than one year.

This means that even if a worker signs an employment contract with a noncompete agreement that prevents the employee from going to work for a competitor for more than one year after their termination of employment, the agreement will be unenforceable in a court of law. The new law further states that, if an employer brings a worker to court to try to enforce an overly restrictive noncompete agreement, the employer will be responsible for all court or arbitration costs, including attorneys’ fees and damages.

The new Utah law will apply only to employers with 20 or more employees and to noncompete agreements signed on or after May 10, 2016.

When businesses first started using noncompete agreements, it was mostly for their executives and higher-level employees. Lower-level employees were not normally required to sign noncompete agreements because they frequently don’t have access to trade secrets or significant business information. But as noncompetes have become increasingly common, employers have included them in contracts with almost all their workers.

Many employees and employee advocates have spoken out against noncompete agreements signed by rank-and-file workers. They are unnecessary, rarely do anything to protect the legitimate business interests of the employer, and make it unnecessarily difficult for the employee to find any other job. Although an earlier version of Utah’s new bill did contain a provision that invalidated noncompete agreements signed by lower-level employees, the final version of the bill as it was passed contains no such provision. So although the passing of the new bill means good news for employees working in Utah, there are still opportunities for employers to take advantage of their workers so employees would be well advised to check all employment contracts carefully before signing.

Our Oak Brook non-compete agreement attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.

DiTommaso Lubin Austermuehle a firm of Chicago business dispute attorneys handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business lawyers with offices near Lombard, Oakbrook Terrace and Naperville have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.

DiTommaso Lubin Austermuehle a Chicago business litigation law firm represents both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Based in Oakbrook Terrace and downtown Chicago, our Palatine and Barrington non-compete clause lawyers take cases from Naperville, Geneva and many other cities throughout Illinois, as well as in Indiana, Wisconsin and the entire United States. To learn more or set up a free consultation, please contact one of our Chicago business dispute lawyers through the Internet or call toll-free at 1-877-990-4990 today.