Arizona Companies Guide to Non-Compete Agreements
July 15, 2019
Arizona Companies Guide to Non-Compete Agreements
As an Arizona business and employment lawyer, companies come to me looking to protect their most valuable assets. One of those assets is the goodwill a company has created through the relationships its employees have created with customers, vendors, or third parties. While intangible, anyone running a business knows how critical this is to any business. One way to protect this asset is through non-compete agreements, which restrict an employee from performing the same work for a competitor.
The reason to have Counxel Legal Firm draft your non-compete agreement is simple: the most common reason that litigation arises from non-compete agreements is that the non-compete was poorly drafted and is potentially unenforceable.
This uncertainty is usually created when company’s use non-compete forms they have found online or when they ask a lawyer friend that doesn’t have experience with non-compete law to help them because they feel that it is cost-prohibitive to use a non-compete specific attorney. By buying an online form or using an untrained non-compete lawyer, you end up purchasing the “product” but you do not get the situation-specific “advice” that one of our non-compete attorneys would give to your situation. It is only a matter of time till that ends poorly.
What Makes a Non-Compete Agreement Enforceable
A non-compete agreement can be enforceable:
1. When it has a legitimate protectable interest
2. When it has a limited time duration.
3. When it has a reasonable restricted area
4. When it has a reasonable limitation on the type of work an employee can perform
Too often, companies attempt to make the non-compete cover too big of a geographic area, make it last too long, and make it cover job descriptions outside that of the employee. For example, if Bill is a manager for ABC Company that is in the business of selling high-end shoes online, then what would an appropriate non-compete agreement look like for Bill. Let’s walk through the steps:
- “Legitimate Protectable Interest” – This means that a company cannot limit an employee from doing something in which the company has no interest to protect.
- “Reasonable Limitation on the Type of Work an Employee Can Perform” – This has two facets: 1) What is the company’s business, and 2) What is Bill’s specific job (is he the manager of I.T., of sales, of production)? Company’s get into trouble when they try to utilize a non-compete to restrict an employee from doing anything that is in competition with any part of the company’s business rather than limiting it to the restricting the employee from engaging in activities related to the specific function they performed within the company.
- “Reasonable Geographic Limitation” – The question here is what is the geographic reach of the company and what part does Bill’s managerial position play in that? If the company is online, then it may be reasonable to restrict Bill from competing worldwide or nationwide.
- “Reasonable Time Limitation” – The question is how long would it take for the company to replace Bill and to isolate Bill from the company’s personnel/clients?
If any one of the three non-compete restrictions is too broad, then the non-compete agreement can be uncertain or even unenforceable. This can lead to costly litigation.
As to enforcing non-compete agreements, employees sometimes engage in activities that violate their non-compete agreement either knowingly or unknowingly. If you have a clear and enforceable non-compete agreement, then you will feel confident in spending the money and time to enforce it. Even if you are unsure about your non-compete agreements, sometimes a company must take steps to protect its legitimate business interests. The steps to enforcing a non-compete agreement are simple:
- Make sure you have a signed copy of the non-compete agreement;
- Get the document reviewed by Copper Canyon Law non-compete attorney;
- Send a cease and desist letter to the employee demanding that they stop the violating behavior;
- If that doesn’t work, then be prepared to file a lawsuit and a corresponding request that the court take immediate action to temporarily stop the employee’s violation (this is called a Temporary Restraining Order); and,
- Finally, you will ask the court to set a hearing quickly to stop the employee permanently from stopping their wrongful conduct (called a Preliminary Injunction).
With a properly drafted non-compete agreement, like the ones drafted at Counxel Legal Firm, you will be looking to recover your attorneys’ fees if you prevail in the case.
Contact Counxel Legal Firm
If you have questions about a non-compete agreement or you would like to set up a strategy session with an attorney, then Counxel Legal Firm would love to help. Contact us at 480-536-6122 or at firstname.lastname@example.org.
This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Use of and access to this article does not create an attorney-client relationship between you and Counxel Legal Firm. Please contact email@example.com or 480-536-6122 to request specific information for your situation.
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