Article

• Publication year: 2013
• Pages: 28

Article Vol. 26 No. 3 Pg. 28 Utah Bar Journal June 2013

May/June 2013

EMPLOYMENT COVENANTS: AN OUNCE OF PREVENTION IS WORTH A POUND OF CURE

Gregory M. Saylin and Tyson C. Horrocks

Benjamin Franklin once said that “an ounce of prevention is worth a pound of cure.” An employer in a recent appellate court ruling may have found this out the hard way. In Utah Telecommunication Open Infrastructure Agency v. Hogan (UTOPIA v. Hogan), 2013 UT App 8, 294 P.3d 645, the employer sought to prevent an employee from disclosing confidential information pursuant to a professional services agreement. (While the “employee” in the case may be more accurately referred to as an independent contractor, the authors refer to him as an employee and the plaintiff as the employer to better discuss the application of the decision in the labor and employment law context.) The employer not only lost at the preliminary injunction hearing because the relied-upon contract language was found not to cover the threatened disclosure, but on appeal, to add insult to injury, the Utah Court of Appeals found that the employer may have to pay the employee’s attorneys’ fees and costs associated with the “wrongfully” issued temporary restraining order. This article explores the impact of the recent ruling on an employer’s non-disclosure and confidentiality agreements, as well as newly identified risks in enforcement through injunctive relief.

Non-Disclosure, Confidentiality & Non-Compete Agreements

In our experience, many Utah employers choose to be “penny wise and pound foolish” in using the same protective covenants in their employment and professional services contracts that they have been using for years. In fact, in many cases, no one in HR can really remember where the contract forms came from in the first place. With the constantly changing legal landscape, employers should undertake a periodic review of their contractual language and identify circumstances when specially tailored language is needed for a particular employee, category of employees, or contractor.

The UTOPIA v. Hogan case presents a helpful backdrop for discussion. In that case, the employer sought to protect its confidential information by including the following provision in its professional services agreement with Hogan: “[Hogan] understands that the Services performed for UTOPIA are confidential and [Hogan] agrees to maintain such confidentiality.” UTOPIA, 2013 UT App 8, ¶ 2 (alterations in original)...