What Every Employer Should Know

Non-compete agreements are a common tool for protecting a company's business interests, but they are also one of the most frequently misunderstood - and litigated - types of employment contracts. Employers who use them should ensure that their agreements are both enforceable and tailored to legitimate business needs.

What Is a Non-Compete Agreement?

A non-compete agreement (sometimes called a covenant not to compete) restricts an employee from working for a competitor, starting a competing business, or otherwise engaging in certain business activities after leaving the employer. The purpose is to prevent unfair competition that could arise if an employee uses the company's confidential information, customer relationships, or trade secrets in a competing role.

Key Elements of an Enforceable Non-Compete

While specific requirements vary by state, courts generally consider several factors when determining whether a non-compete is valid and enforceable:

  • Legitimate Business Interest: The restriction must protect something more than ordinary competition - such as trade secrets, confidential information, or special customer relationships.
  • Reasonable Scope: The agreement must be limited in geography, time, and activity to what is reasonably necessary to protect the employer's interests. Overly broad restrictions are likely to be struck down. In Utah specifically, this includes non-compete agreements that last longer than 12 months from the date the employee's employment ends. If a non-compete exceeds that duration - even by a single day - the entire agreement is void and unenforceable, not just the portion beyond 12 months.
  • Consideration: The employee must receive something of value in exchange for signing - often the job itself for new hires, or additional compensation or benefits for existing employees.

Best Practices for Utah Employers

To reduce legal risk and strengthen your agreements:

  • Keep non-competes under 12 months - anything longer is automatically void.
  • Limit restrictions to positions that truly warrant protection (executives, key salespeople, or those with access to sensitive information).
  • Use clear language that defines the prohibited activities and geographic scope.
  • Consider alternatives like non-solicitation and confidentiality agreements for broader use across your workforce.
  • Review and update agreements regularly to ensure compliance with current law.
  • Consult counsel before enforcing or drafting any restrictive covenant to avoid potential legal exposure.

Conclusion

Non-compete agreements can be valuable when used properly - but only if they are narrowly drawn, supported by legitimate interests, and compliant with state and federal law. With growing legal restrictions and evolving enforcement trends, employers should review their current agreements and practices now to ensure they remain enforceable and effective.

Our team at Employer-Lawyer assists Utah businesses with drafting, enforcing, and updating non-compete and related agreements. Contact us today for a compliance review or to discuss best practices for protecting your company's interests.