In Utah, non‑compete agreements remain enforceable—but the 2026 Federal Trade Commission rule imposes new limits that employers must follow. While state law still permits reasonable covenants, the FTC rule bars any non‑compete that is not supported by a bona‑fide business necessity and that restricts workers earning less than $100,000 annually. Companies in Utah must therefore rewrite or abandon many existing clauses to avoid federal penalties and potential civil litigation.
How the 2026 FTC Rule Affects Utah Non‑Competes
The FTC’s 2026 rule, announced in January 2025, declares non‑competes “unfair practices” unless the employer demonstrates a legitimate, documented business justification. The rule applies nationwide, overriding any state law that allows broader restrictions. In Utah, courts will now evaluate non‑competes under a dual framework: the traditional reasonableness test under Utah Code § 34‑30‑121 and the federal necessity standard. Employers must produce written evidence—such as trade secret documentation, customer lists, or significant investment in employee training—to survive a challenge.
What Utah Courts Considered Reasonable Before the FTC Rule
Prior to the federal change, Utah judges looked at four factors: (1) duration, usually no more than 12 months; (2) geographic scope, limited to the area where the employer actually does business; (3) the interests protected, such as trade secrets; and (4) impact on the employee’s ability to find work. The new FTC rule does not eliminate these factors but adds a strict “necessity” gate. Even a narrowly tailored, short‑term covenant will be unenforceable if the employer cannot prove a concrete business need.
Practical Steps for Utah Employers
- Conduct an audit of all existing non‑compete agreements.
- Identify employees earning under $100,000 who are covered by a covenant.
- Document the specific business interest each agreement protects.
- Rewrite clauses to include explicit necessity language and limit scope.
- Implement a compliance program to monitor adherence to both Utah and federal standards.
What Employees Should Know
Workers earning under $100,000 are automatically protected from non‑competes unless the employer can show a clear business justification. Even for higher‑paid staff, the covenant must be reasonable in time and geography and tied to protectable assets. Employees can request the employer’s written justification and may file a complaint with the FTC if the requirement is not met.
Future Outlook
Legal scholars predict that Utah courts will align quickly with the FTC rule, given the agency’s enforcement authority. Legislative proposals to codify the federal standard into state law are already circulating in the Utah Legislature. Until such statutes are enacted, employers must rely on the combined state‑federal test to avoid costly disputes.
Can an employer enforce a non‑compete against an employee earning $90,000?
No. Under the FTC rule, any non‑compete covering an employee with annual earnings below $100,000 is prohibited unless the employer can prove a bona‑fide business necessity, which the rule makes extremely difficult to demonstrate.
Does the FTC rule invalidate existing Utah non‑competes?
It does not automatically void them, but it renders unenforceable any covenant that fails the necessity test. Employers must reassess each agreement and provide the required documentation.
Are “garden‑leave” or “non‑solicitation” clauses affected?
Garden‑leave provisions that simply pay an employee during a restricted period are still permissible if they meet reasonableness criteria. Non‑solicitation clauses are generally allowed because they protect customer relationships rather than prohibit competition, but they must also satisfy the necessity requirement if they restrict a worker’s ability to work.
What penalties can the FTC impose for violating the rule?
The FTC may seek civil penalties up to $16,000 per violation, injunctions to cease enforcement, and restitution to affected employees. Courts may also award attorneys’ fees.
How should a Utah employer draft a compliant non‑compete after 2026?
The agreement should (1) be limited to 12 months or less, (2) cover only the geographic area where the employer operates, (3) specify the protectable interest, and (4) include a clause stating that the covenant is supported by documented business necessity, with the supporting documents attached or readily producible.