H.B. 183

1

EMPLOYEE NONCOMPETITION CONTRACTS
2 2007 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Lorie D. Fowlke
5 Senate Sponsor: ____________
6
7 LONG TITLE
8 General Description:
9 This bill modifies the Judicial Code to address employee noncompetition contracts.
10 Highlighted Provisions:
11 This bill:
12 . defines terms;
13 . provides when noncompetition contracts are permissible;
14 . provides when noncompetition contracts are unenforceable; and
15 . addresses enforcement when only a portion of the contract violates the statute.
16 Monies Appropriated in this Bill:
17 None
18 Other Special Clauses:
19 None
20 Utah Code Sections Affected:
21 ENACTS:
22 78-27-66, Utah Code Annotated 1953
23
24 Be it enacted by the Legislature of the state of Utah:
25 Section 1. Section 78-27-66 is enacted to read:
26 78-27-66. Employment related to noncompetition contracts.
27 (1) As used in this section:

28 (a) "Common calling" means any employment:
29 (i) (A) for which no special skill or talent is involved; and
30 (B) that may be performed by any other employee of average competence; or
31 (ii) defined by a court of competent jurisdiction as a common calling.
32 (b) "Employer" means a person that employs one or more persons.
33 (c) "Just cause" means that the employee is discharged for:
34 (i) an act or omission in connection with employment, not constituting a crime, which
35 is deliberate, willful, or wanton and adverse to the employer's rightful interest; or
36 (ii) dishonesty constituting a crime, any felony, or class A misdemeanor in connection
37 with the claimant's work as shown:
38 (A) by the facts, together with the employee's admission; or
39 (B) by the employee's conviction of that crime in a court of competent jurisdiction.
40 (2) Subject to Subsection (3), a contract between an employer and an employee that
41 restricts or prohibits the employee from competing with the employer after the employee no
42 longer works for the employer is permitted if:
43 (a) the contract limits the former employee's ability to compete to the geographical area
44 where the employee worked; and
45 (b) the contract does not impose a greater restraint on the employee than is necessary to
46 protect the former employer's goodwill.
47 (3) A contract provision described in Subsection (2) may not be enforced if:
48 (a) the restriction or prohibition in the contract provision is for a period of more than
49 one year from the day on which the employee is no longer employed by the employer;
50 (b) the employee is an employee in a common calling;
51 (c) the employee does not possess skills or talents that are special, unique, or
52 extraordinary; or
53 (d) the employee's employment is terminated by the employer without just cause.
54 (4) If a court finds that any part of a contract provision that restricts or prohibits an
55 employee from competing with the employer after the employee no longer works for the
56 employer violates this section, the entire contract provision restricting or prohibiting
57 competition is unenforceable.

Legislative Review Note
as of 1-24-07 3:29 PM

Office of Legislative Research and General Counsel