Arizona Law on Non-Compete Agreements: What You Need to Know
Non-compete agreements are common in many industries, including technology, healthcare, and finance. These agreements prevent employees from working for a competitor or starting a competing business for a certain period of time after leaving their employer. While these agreements can protect a company`s trade secrets and confidential information, they can also limit an employee`s job opportunities and career growth.
In Arizona, non-compete agreements are enforceable, but they must meet certain requirements. Here`s what you need to know:
1. Reasonable Restrictions
Under Arizona law, a non-compete agreement must be reasonable in its scope, duration, and geographic area. The restrictions must be necessary to protect the employer`s legitimate business interests, such as trade secrets or customer relationships. For example, a non-compete agreement that prohibits an employee from working in any industry for 10 years would likely be considered unreasonable and unenforceable.
2. Advance Notice
Employers must provide employees with a copy of the non-compete agreement at least two weeks before the employee is expected to sign it. This gives the employee time to review the agreement and consult with legal counsel if necessary.
To be enforceable, a non-compete agreement must provide the employee with some form of consideration, such as a bonus, stock options, or a promotion. The consideration must be reasonable and not unduly burdensome to the employee.
4. No Anti-Poaching
In 2016, Arizona passed a law that prohibits non-compete agreements that restrict employees from working for a competitor, but only to the extent that the restriction is intended to prevent the hiring of the employee by a competitor. This means that anti-poaching agreements, which prevent companies from hiring each other`s employees, are still enforceable.
5. Limited Enforcement
Arizona courts can modify or refuse to enforce a non-compete agreement if it is found to be overly broad or oppressive to the employee. If the court finds that the non-compete agreement is not enforceable, it may award damages to the employee or require the employer to pay the employee`s legal fees.
In summary, non-compete agreements are enforceable in Arizona, but they must meet certain requirements to be valid. Employers should be careful to draft agreements that are reasonable in scope, provide adequate consideration to the employee, and protect legitimate business interests. Employees should review non-compete agreements carefully and seek legal advice if they have any questions or concerns.