Employee Non-Compete Agreement and Enforceability Memo — Utah

UTAH Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

Part A — Enforceability Memo

TO: [CLIENT / HIRING MANAGER]
FROM: [COUNSEL NAME], [LAW FIRM]
RE: Enforceability of Proposed Non-Compete Agreement with [EMPLOYEE NAME] — Utah Law (Post-Employment Restrictions Act)
DATE: [__/__/____]

1. Executive Summary

Utah enforces post-employment non-compete agreements within tight statutory and common-law limits. The Post-Employment Restrictions Act (Utah Code §§ 34-51-101 to 34-51-301), effective for agreements entered on or after May 10, 2016, caps post-employment non-compete duration at one year and renders any longer agreement "void." Beyond the statutory cap, the agreement must still satisfy the common-law reasonableness factors articulated in Kasco Servs. Corp. v. Benson, 831 P.2d 86 (Utah 1992): supported by consideration, free of bad faith, necessary to protect goodwill, and reasonable in time and geography.

Critical risk: Under Utah Code § 34-51-301, an employer that seeks to enforce an unenforceable non-compete is liable for the employee's arbitration costs, court costs, and attorney fees. Draft conservatively to avoid this fee-shifting trap.

2. Statutory and Common-Law Requirements

3. Excluded / Differently Regulated Agreements

4. Broadcasting Carve-Out (§ 34-51-201(2))

A non-compete between a broadcasting company and a broadcasting employee is valid only if:

1. The employee is an exempt broadcasting employee;
2. The non-compete is part of a written employment contract of reasonable duration (based on industry standards, position, experience, geography, and unique circumstances);
3. Either the broadcasting company terminates the employee for cause, or the employee breaches the contract such that the employee is no longer employed; and
4. Duration is no longer than the earlier of (i) one year post-termination, or (ii) the day the original contract term ends.

A non-compete failing any of these is void.

5. Fee-Shifting Penalty (§ 34-51-301)

If an employer seeks to enforce a non-compete and the agreement is found unenforceable in court or arbitration, the employer is liable for the employee's:

• Arbitration costs
• Court costs
• Attorney fees

This is one-way fee-shifting against the employer. There is no corresponding fee award if the employer prevails. Draft conservatively to avoid triggering this remedy.

6. Recommended Drafting Parameters (UT)

7. Recommendation

[The proposed NCA with [EMPLOYEE NAME] is / is not enforceable as drafted under Utah law. Recommended modifications: ________________________________.]

Part B — Non-Compete Agreement (Utah — § 34-51 Compliant)

EMPLOYEE NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY AGREEMENT

This Agreement is entered into between [EMPLOYER NAME] ("Company") and [EMPLOYEE NAME] ("Employee") on [__/__/____] (the "Effective Date"), which is on or after May 10, 2016, the effective date of the Utah Post-Employment Restrictions Act.

Recitals

A. Company is engaged in the business of [________________________________] (the "Business").

B. Employee [is being offered initial employment with / is being promoted within / is receiving the following additional consideration from] Company: [________________________________].

C. Employee will have access to Company's trade secrets, confidential business information, customer relationships, and specialized training, the protection of which constitutes a legitimate business interest within the meaning of Kasco Servs. Corp. v. Benson, 831 P.2d 86 (Utah 1992).

D. The parties acknowledge that the restrictions in this Agreement comply with Utah Code §§ 34-51-101 to 34-51-301 and the common-law reasonableness factors.

1. Definitions

1.1 "Competing Business" means [________________________________].
1.2 "Restricted Territory" means [the following Utah counties / a [____]-mile radius from each Company office at which Employee worked during the 12 months prior to termination]: [________________________________].
1.3 "Restricted Period" means one (1) year [or, if shorter, [________ months]] following termination of Employee's employment for any reason. Notwithstanding any other provision, in no event shall the Restricted Period exceed one (1) year, consistent with Utah Code § 34-51-201(1).
1.4 "Customer" means any person or entity to whom Company sold products or provided services during the 24 months preceding Employee's termination and whom Employee personally serviced or about whom Employee received Confidential Information.
1.5 "Confidential Information" includes trade secrets as defined in Utah Code § 13-24-2.

2. Non-Competition

During the Restricted Period, within the Restricted Territory, Employee shall not, directly or indirectly, engage in any Competing Business in a capacity substantially similar to the capacity in which Employee served Company. In no event shall this restriction extend beyond one (1) year from the date Employee is no longer employed by Company (Utah Code § 34-51-201(1)).

3. Customer Non-Solicitation (Not Subject to One-Year Cap)

During the [twelve (12) to twenty-four (24)] months following termination, Employee shall not solicit or accept business from any Customer with respect to products or services competitive with the Business. The parties acknowledge that this provision is a non-solicitation agreement and is not subject to the one-year cap in Utah Code § 34-51-201.

4. Employee Non-Solicitation (Not Subject to One-Year Cap)

For [twelve (12) to twenty-four (24)] months after termination, Employee shall not solicit, recruit, or hire any person who was an employee or independent contractor of Company during the 6 months preceding Employee's termination.

5. Confidentiality and Trade Secrets

Employee shall hold all Confidential Information in strict confidence. Trade-secret obligations are perpetual; other Confidential Information obligations continue [____] years post-termination. Misappropriation is independently actionable under the Utah Uniform Trade Secrets Act, Utah Code §§ 13-24-1 to 13-24-9.

6. Return of Property

Upon termination, Employee shall return all Company property and certify deletion of Company information from personal devices.

7. Reasonableness; Severability

The parties acknowledge that the restrictions are reasonable under Kasco Servs. Corp. v. Benson, supported by good and valuable consideration, entered into in good faith, and necessary to protect Company's legitimate goodwill. If any provision is held unenforceable, the parties intend that the remaining provisions remain in effect.

8. Remedies

Breach causes irreparable harm. Company may seek injunctive relief and damages. The parties acknowledge Utah Code § 34-51-301, under which an employer that seeks to enforce an unenforceable non-compete is liable for the employee's arbitration costs, court costs, and attorney fees.

9. Governing Law; Venue

Utah law governs. Venue is the state and federal courts in [________________________________] County, Utah. Any choice-of-law provision selecting another state is void to the extent it would deprive Employee of the protections of the Utah Post-Employment Restrictions Act.

10. Severability; Survival; Entire Agreement

Severable. Sections 1–8 survive termination. This is the entire agreement on its subject matter.

11. Employee Acknowledgments

Employee acknowledges: (a) opportunity to consult independent counsel; (b) consideration in Recital B is good and sufficient; (c) protectable interests are real and substantial; (d) Employee enters this Agreement freely.

EMPLOYEE:

COMPANY:

Part C — Pre-Signing Checklist

☐ One-year cap observed in Section 2 — Restricted Period does not exceed 12 months.
☐ Kasco common-law factors documented in legal file: consideration, no bad faith, necessary to protect goodwill, reasonable time and geography.
☐ Consideration identified in Recital B — initial employment or specific additional benefit.
☐ Restricted Territory geographically reasonable and tied to Company's actual business area / Employee's actual work location.
☐ Scope of activities tied to Employee's actual role (no "any capacity").
☐ Customer non-solicit narrowly drafted (12–24 months) — Section 3.
☐ Employee non-solicit narrowly drafted (12–24 months) — Section 4.
☐ Confidentiality anchored to Utah UTSA (Utah Code §§ 13-24-1 et seq.).
☐ Broadcasting carve-out addressed if Company is a broadcaster — confirm all § 34-51-201(2) elements.
☐ Severance-agreement non-compete (if used at termination) drafted under § 34-51-202(2), free of the one-year cap.
☐ Sale-of-business non-compete (if applicable) drafted under § 34-51-202(1).
☐ Fee-shifting (§ 34-51-301) risk evaluated before any enforcement action.
☐ Governing law / venue set to Utah.
☐ Reasonable opportunity to review — provide draft at least [____] business days before execution.
☐ Onboarding file retains: signed offer letter, signed Agreement, consideration documentation.
☐ Existing-employer NCA conflict check for laterals.

Sources and References

• Utah Code Title 34, Chapter 51 (Post-Employment Restrictions Act): https://le.utah.gov/xcode/Title34/Chapter51/34-51.html
• Utah Code § 34-51-201: https://le.utah.gov/xcode/Title34/Chapter51/34-51-S201.html
• Utah Code § 34-51-202: https://le.utah.gov/xcode/Title34/Chapter51/34-51-S202.html
• Utah Code § 34-51-301: https://le.utah.gov/xcode/Title34/Chapter51/34-51-S301.html
• Utah Uniform Trade Secrets Act, Utah Code §§ 13-24-1 to 13-24-9: https://le.utah.gov/xcode/Title13/Chapter24/13-24.html
• Kasco Servs. Corp. v. Benson, 831 P.2d 86 (Utah 1992)
• FindLaw — Utah Code § 34-51-201: https://codes.findlaw.com/ut/title-34-labor-in-general/ut-code-sect-34-51-201/
• Utah State Bar: https://www.utahbar.org/