An Arizona non-compete agreement restricts a person’s ability to work in a specific business to protect the legitimate protectable interest of another party. It’s prohibited in Arizona for attorneys and television or radio employees.
A non-compete cannot be entered as the sole reason for an agreement. It must be ancillary to an employment contract, sale of a business, or another arrangement.
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Yes, a non-compete is enforceable if there is a legitimate protectable interest except for the following professions:
- Television stations and networks (ARS § 23-494)
- Radio stations and networks (ARS § 23-494)
- Attorneys (Rule 5.6)
A legitimate protectable interest is defined as:
- Confidential information;
- Valuable trade information; and
- Customer relationships.
In another case, a legitimate interest was defined as any interest “beyond the employer’s desire to protect itself from competition.”
A non-compete cannot be the “main lawful purpose” of the agreement. It must be ancillary to an employment contract or other agreement. (Amex Distributing Co. v. Mascari (1986))
Arizona courts have not determined if they would uphold a non-compete between an employer and a terminated employee. Although, if an employer terminates an employee after a “short length of time after extracting the employee’s signature for a restrictive covenant,” there would be a failure of consideration in the agreement. (Mattison v. Johnston (1986))
An Arizona court will rely on the employer to prove a legitimate protectable interest. (Bryceland v. Northey (1989))
The promise of continued employment of an at-will employee serves as sufficient consideration for a non-compete. (Mattison v. Johnston (1986))
If an employee has unique or exceptional skills, such as medical qualifications, three (3) years is considered reasonable (Valley Medical Specialists v. Farber (1999)).
For an employee with no special skills or “special training or education” then less than two (2) years is recommended (Liss v. Exel Transportation (2007))
For the sale of a business, a period of up to 10 years was considered reasonable by an Arizona court. (Gann v. Morris (1979))
Arizona courts blue pencil non-competes. They can “eliminate grammatically severable, unreasonable provisions,” and preserve “valid portions” of a non-compete agreement. (Compass Bank v. Hartley (2006))