Arizona's Non Compete Labor Laws

Employers often use employment non-compete agreements to prevent employees from taking customers or trade secrets with them to another company. The courts in Arizona will enforce these types of agreements, providing certain legal tests are met. Arizona courts also have the ability in certain cases to reform the agreement to make it acceptable. A different type of agreement, a non-solicitation agreement, is looked on more favorably by the courts. The state legislature has prohibited a specific type of non-compete agreement.

Reasonable Requirement Test

The employer must be protecting a legitimate business interest by restricting where an employee can work after leaving his job, and the restriction imposed in the non-compete agreement must be deemed reasonable. If no legitimate business interest is shown, no kind of restriction will be enforced. An allowed restriction, based on geographic area and time frame, must be reasonable to the circumstances. The Arizona courts are predisposed to limited time and geographic restrictions. The usual used standard for the time frame is long enough for the employer to replace the employee who left and for the new hire to prove himself capable.

Blue Pencil Rule

The Arizona courts follow the blue pencil rule when deciding on the enforceability of non-compete agreements. This allows the courts to replace too broad or oppressive restrictions with more narrow and acceptable ones, instead of ruling the agreement as not enforceable at all. This typically is only applied if the agreement was drafted with step-down provisions, specifying less restrictive language to replace the disallowed restrictions. This is controversial, though, because legal critics claim it allows the court to impose contract terms on the parties. Some other states do not follow this rule for this reason.

Alternate Agreement Type

Because a non-compete agreement restricts an employee's ability to make a living, the courts impose strict tests and guidelines to allow their enforceability. An alternate way for the employer to protect his customers or trade secrets is through a non-solicitation agreement. This prohibits the employee from soliciting the employer's customers or selling and using the employer's trade secrets after leaving the company. The Arizona courts typically will allow broader and tougher restrictions in this type of agreement. This is because it restricts the employee's actions and not his ability to work.

Legislative Prohibition

The Arizona state legislature has added a prohibition against the use of employment non-compete agreements to the state's labor law statutes. This prohibition is specifically applicable to employers who are TV and radio broadcasters that use the public airwaves. The statute makes it illegal for a broadcaster employer to make a non-compete clause a condition of employment for any current or prospective employees.

References

• The Law Office of Joseph A. Velez: Employment Contracts/Non-Compete Agreements
• "Arizona Attorney"; Non-Compete Agreements With Step-Down Provisions; Ali J. Farhang and Ray K. Harris; December 2005
• Wallin Harrrison Attorneys at Law; Newsletter: Non-Compete Issues in Employment Agreements; Chad A. Hester; Spring 2011
• Arizona State Legislature: Fiftieth Legislature - First Regular Session