Arizona Non-Compete Agreement
June 24, 2019
Arizona Non-Compete Agreement
Non-compete agreements are used to stop an individual from working for competitors after they are done working for a company. The big question is, are they even enforceable in Arizona? Unlike California, Arizona does allow for non-compete agreements to exist. Arizona judges have found non-compete agreements to be enforceable in the following instances:
- When it has a legitimate business purpose
- When they have a limited time duration
- When they have a reasonable restricted area
- When it is narrowly focused on the individuals previous job duties
Legitimate Business Purpose
When determining if a non-compete agreement has a legitimate business purpose, Arizona judges often ask, why does a business need this restriction? For example, if a business is looking to enforce a non-compete agreement against low-level employees, judges will likely find that it does not protect a legitimate interest of the business. See i.e. Jimmy Johns attempts to restrict sandwich makers from working for a competitor were met by disfavor in the courts.
In other instances, Arizona judges rely on whether it is best for the public for a non-compete to be enforced or not. This specifically applies in the instances of doctor-patient relationships or attorney-client relationships. See i.e. Valley Med Specs v. Farber where restricting a doctor from providing services for patients was found unenforceable). In all instances, Arizona judges look to three factors of whether there is a reasonable restricted area, a limited time frame, and a narrow focus on the individual’s job duties.
Limited Time Duration
As to a limited time duration, Arizona judges have found time frames as much as two years enforceable for a non-compete agreement. See i.e. Highway Technology Inc. v. Porter where the Arizona judge found it would reasonably take two years to replace the employee and establish relationships with customers of that employee.
At other times, the court has found two years to be unreasonable. See i.e. Bryceland V. Northey where it only took 14 weeks to replace an employee, the Arizona judge found two years an unreasonable amount of time for a non-compete. This is because an employer has a legitimate interest in having a reasonable amount of time to replace the former employee by hiring a new employee and having that individual establish working relationships. See i.e. Bedmart Inc. v. Kelly; Modus LLC v. Encore Legal Solutions, Inc. (D. Ariz. Dec. 17, 2013). When no time duration is included, Arizona judges have found the non-compete to be unenforceable. See i.e. Wright v. Palmer.
Reasonable Restricted Area
Like the time duration, a non-compete’s geographic restriction must be reasonable. When there is no geographic limitation, the Arizona judge has found a non-compete unreasonable. See i.e. Varsity Gold Inc. v. Porzio. Arizona judges have stopped non-competes from being enforced when thy stretch even statewide. See i.e. Oliver Pilcher Ins. v. Daniels. However, Arizona judges have found that a county-wide geographic restriction that was accompanied by a narrow limitation to only mattress superstores was enforceable. See i.e. Bedmart Inc. v. Kelly.
Finally, a non-compete must narrowly restrict only the job duties performed by the employee to be enforceable. As an example, Arizona judges have found that an unlimited restriction on all activities of a company is not enforceable, even against the CEO of a company. See i.e. Orca Communication Unlimited, LLC v. Noder where the CEO of Orca decided to start a competing company, and the terms of Orca’s non-compete were found to be too broad. Because of this, it is important to focus the restriction on the specific job duties of the individual employee.
Contact Timothy Coons’ Legal Team
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 email@example.com.
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