Enforceability of Non-Compete Clauses In Arizona
Non-compete clauses are appearing in industries where they were not before commonly seen.
Non-compete agreements are contracts that prevent employees from engaging in business activity that would directly compete with employers for a certain amount of time after the employees leave their jobs. Non-compete agreements have been common in the sales and technology fields for many years, and they are becoming increasingly popular in other industries. Arizona residents should be aware of the rise of these agreements and when a non-compete agreement is enforceable in Arizona.
Non-competes spreading into new fields
Employers are more frequently using non-compete clauses in employment contracts in areas where such clauses were not usually used. According to the New York Times, people who have worked as hairstylists, textbook editors, pesticide sprayers, entry-level social media marketers and summer camp counselors have all had to sign non-compete agreements. Employers are more likely to use litigation to enforce those agreements than in the past, as well. The Wall Street Journal reported that the number of published U.S. Court cases dealing with non-compete agreements increased by 61 percent from 2002 to 2013.
Employers argue that these agreements are necessary to protect the employer’s trade secrets, intellectual property and the investment that the employer makes in training employees. However, others argue that these clauses stifle innovation and economic development by preventing people from starting their own businesses or switching jobs.
Non-competes in Arizona
Laws governing non-compete clauses vary from state to state. In Arizona, the court will enforce a non-compete agreement if the agreement:
- Protects an employer’s legitimate business interest: Some legitimate interests employers may protect with these agreements include trade secrets and intellectual property.
- Is reasonable in scope and duration: The reasonableness of the length of time a non-compete clause is in effect and the geographical area the clause covers varies with different industries, and the employer needs to produce business-based evidence that the scope and duration of a non-compete clause are necessary.
- Does not violate public policy: Examples of non-compete clauses that violate public policy would be clauses that completely prevent an employee from working at all or deprive the public from a critical service.
Arizona courts have the ability to “blue pencil” non-compete agreements so that they can eliminate unreasonable provisions of non-compete agreements while letting the rest of the agreement stand. Therefore, a non-compete agreement will not be totally invalid because of one unreasonable provision.
Consult an attorney
Since non-compete agreements are becoming more common, it is important for both employers and employees to understand how these agreements work. If you have questions about non-compete clauses, contact an experienced Phoenix Business Lawyer who can advise you how to proceed based on your specific circumstances.
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