In Arizona, non-compete agreements may be enforceable if “reasonable.” In determining whether a non-compete is “reasonable,” courts evaluate several factors, none of which are controlling. The factors are:
- Duration. In determining whether the duration is reasonable, courts evaluate how long it would take to find and properly train a replacement. For some types of employees, it may only take a month to find and properly train their replacement. In those circumstances, a 6-month non-compete may not be “reasonable” in terms of duration.
- Geographic Scope. In determining whether the geographic scope is reasonable, courts look at whether the company has clients or customers in each of the cities or states in the geographic area. Courts may not enforce an agreement that prohibits an employee from working in a location where the employer doesn’t have any customers and doesn’t do any business. Such a restriction may not be “reasonable” because the employer may not have a protectable interest in such a geographic scope.
- The type of activity prohibited. Many non-compete agreements state that the employee cannot work in any position for anyone deemed a competitor. This means that a salesman could not work for a competitor, even as a janitor. A court may find that if there is no limitation on the type of job that the employee can have with a competitor, the agreement is not “reasonable.”
Summary
The law in Arizona is complex and “grey.” You should consult an experienced attorney before making any important decisions related to a non-compete agreement. Employers should ensure their non-competes are carefully drafted. Employees need to understand what they are signing, as well as the consequences for violating such an agreement.