“Is a non-compete agreement even enforceable during a pandemic?”
I have been asked that question by both employers and employees. First, you should know that we do not have a lot of case law showing what happens to the enforceability of non-compete agreements during a pandemic. However, we can get a clearer answer by answering a few other questions.
1) Would the non-compete agreement have been enforceable even without the Coronavirus pandemic?
Remember that for a non-compete to be enforceable in Arizona, it must have reasonable geographic restriction and duration, narrow restrictions on the types of prohibited job activities, and not be in violation of public policy. For more information about the enforceability of non-compete agreements, you can read our article directly on that topic here.
2) Can non-compete agreements be enforced when an employee is laid-off, furloughed, or fired?
Yes. Whether an employee voluntarily quits or is furloughed or fired, a non-compete agreement can still be enforceable depending on the answers to questions one, three and four of this article.
3) Did an employer “breach” the non-compete agreement during this Coronavirus?
When looking to see if a non-compete is enforceable, it is important to determine whether the employer first breached the non-compete or corresponding employment agreement with the client. For example, if the employer failed to pay the employee earned wages, then that could make a non-compete agreement unenforceable. For more information about this, you can read our article directly on that topic here.
4) Will public policy weigh in favor of making non-compete agreements unenforceable?
This is kind of like a get-out-of-jail-free card that the Courts can use when determining whether a non-compete agreement is enforceable. For example, while no laws directly prohibit non-compete agreements against doctors, the Arizona Courts have found that, as a matter of public policy, non-compete agreements are difficult to enforce against doctors due to the need for patient choice.
However, the Arizona Courts have not extended that same public policy argument to sales people. Because of the nature of this pandemic (highest unemployment rate since the Great Depression), and because there is a general desire that people be able to work to provide for their families through these difficult times, it seems likely that the public policy argument will gain more traction than previously.
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