The Utah Employee Non-Compete Clause
The Utah Business website just came out with an article on what employees and employers in Utah think of non-compete clauses. There are large debates on the Utah Capital right now as to the validity of such clauses. So far, those for the employers are winning. However, despite what some think, there is still a legal standard to see if the non-compete clause is even legal or enforceable. This is important for Utah employees and employers to know.
The problem with non-compete clauses is they keep an employer from going to another company that may compete against the company. The issue arises where an individual may not be able to find work elsewhere because of a non-compete clause. Some non-compete clauses i Utah can be too broad and cast a burden on the employee.
There are many trucking companies that have non-compete clauses for their drivers and many are so broad that it essentially makes it impossible for a driver to drive with another trucking company and forces them to stay with their trucking company.
These types of clauses fall below the standard that Utah has implemented as to the validity of such clauses.
What is the purpose of a Utah non-compete clause?
Investment company made in training individual
The main purpose of a non-compete clause in Utah is that through time, some Utah employees have become a major investment with their knowledge of the company and the industry, some companies pay for the tuition of their workers to go to grad school or pay for the student loans, so the purpose of the non-compete clause is to protect the financial investment the company has made on that individual.
This also includes individuals such as high executives and directors and the amount of knowledge and trade secret information those individuals have and the investment the company made in hiring and training those individuals.
If the purpose is just to keep Utah employees such as truck drivers from going to other truck-driving companies because the drivers are unhappy with the trucking company, then that is not a valid reason. Many driving companies also claim that they have paid for the education of the driver, in that they paid for sessions for them to pass the course to get their CDL license. For them to drive, a Utah company might claim that they made an investment into their education.
Many trucking companies, however, implement language where they give a “loan” for that education and expect the driver to pay that money back through their working with them. If they decide to quit, then that loan amount would be due in full. So an argument for an investment would be unlikely in that situation, but instead it is more of a scheme to make more money off of their drivers without compensation. Since they call it education, the drivers don’t get pay for their training, they instead incur debt with the loan amount they enter.
In Scenic Aviation there is language in there that says that if the purpose of the non-compete agreement is just for the sole purpose of drawing competition down from other companies in regards to work-force then that isn’t a valid enough reason to be enforceable.
So in Utah, if you are not a director or an executive and the company spent little to nothing on training you, then it raises questions on whether the company is just trying to let good hands go to the competition.
Utah non-competes have to be tied a geographic location
The case also states that a Utah non-compete clause has to be tied to a specific geographic location to be enforceable. This means that a company typically cannot make it so an employee cannot work anywhere within the United States. The geographic location has to be relevant to the area that person served.
So if a person worked and competed in the Utah markets, typically a non-compete that has it where a person cannot work within 50 miles of that location can be found to be reasonable. If the geographic location is overly broad and tied to areas where that person did not compete or where the company does not have a physical presence or market presence, it could be unreasonable as well.
However, there are small exceptions from keeping someone from working within the United States. This depends on the nature of the business, the reach of the business in the U.S. and how many other competitors there are.
The court also weighs the balance of the purpose of the non-compete clause and the undue-hardship on the employee. Also, if a Utah non-compete isn’t tied to a geographic location, there are issues to enforceability under the privileges and immunities clause. Scenic Aviation, Inc. v. Blick, 2:02-CV-01201 PGC, (D.UTAH 2003).
Utah Non-compete clauses also have to be for one year
Also, a Utah non-compete clause can only be for one year. If the language has it for a longer amount, the contract could be unenforceable.
So even if a company says that their is legislation that says they can enforce a non-compete clause, or that legislation still has to meet the standard set forth in Scenic Aviation, Inc for it to be enforceable. If you have questions about the enforceability of a non-compete clause, feel free to give us a call and we can review your case for you.
You should be compensated for entering into a non-compete clause in Utah
Every contract requires consideration, meaning an exchange in promises. Most times, Utah non-compete clauses gives nothing in return to the employee for entering into the non-compete agreement. Also, some Utah non-compete agreements have language where it says, “in exchange for salary and continued employment.”
However, depending on the circumstance, that may not be enforceable if the salary and employment terms were already agreed to. A person may need to be compensated to sit on the sidelines for 12 months in addition to any employee salary terms.
If you have questions about entering into a Utah non-compete agreement or have entered into a non-compete agreement and want to know about its enforceability, reach out to out Utah Employment Law Firm today on how we can help you with your case.