Are Non-Compete Agreements And Other Restrictive Covenants Enforceable In Arizona?
One of the most common calls we get is from employees who have left their jobs, either voluntarily or involuntarily, and are now faced with contractual restrictions stemming from a non-compete agreement they may have signed years earlier. Unfortunately, the answer to the question of whether the restictive covenants are enforceable or not is usually "It depends."
As a general rule, Arizona courts have recognized the need for an employer to protect itself and its customer relationships when an employee leaves and will enforce reasonable agreements that limit a former employee's right to compete with the former employer. There are a number of factors that will be considered by a court in determining whether such an agreement is reasonable, however, and Arizona courts consistently refuse to enforce agreements that are overly broad or overreaching.
Covenants Not To Compete vs. Non-Solicitation Agreements
Many agreements signed by employees include both non-compete provisions as well as provision prohibiting solicitation of customers or former employees. Often, however, an agreement may only address one or the other. A non-compete will preclude the former employee from working in the same business or industry as the same employer, usually within some defined geographic scope and time period. A non-solicitation agreement, on the other hand, will prohibit the former employee from contacting former customers or poaching other employees, but may be less restrictive as to future employment. Whatever the nature of the agreement, it will usually be enforceable unless its restrictions are found to be unreasonable.
What Restraints Are Unreasonable In A Non-Compete Agreement?
Unfortunately, in most cases there are no clear guidelines or precedents to help an employee or employer know whether a non-compete agreement will be enforceable. As stated above, such contracts are valid and enforceable but there is a long tradition of judicial disfavor towards a covenant that prevents a person from pursuing gainful employment. That being the case, the burden is typically on the party seeking to enforce the covenant not to compete (the employer) and that party must demonstrate that the restriction is no greater than necessary to protect the employer's legitimate interests and is not outweighed by the potential hardship to the employee and injury to the public.
So Can You Tell Me Whether This Non-Compete Is Enforceable?
Probably Not. A lawyer can review the agreement and provide an opinion of the relative strengths and weeknesses of each case, but every case of this type is different and it is impossible to predict how a court may rule. We can, however, also help you understand the risks and potential costs of violating such an agreement or, from the employer's point of view, of seeking to enforce a non-compete agreement.