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Understanding non-compete agreements

Non-compete agreements have become increasingly common at Arizona businesses. The laws on these documents will vary from one state to the next, but as of right now, Arizona has fairly lax laws on the matter. For example, in some states, the agreement becomes unenforceable if the employer fires an employee without just cause. That law does not apply to Arizona. 

Non-compete agreements can be advantageous, but the employer needs to set forth the proper terms. Both employers and employees alike can consult with an attorney if they fear there is a provision of the agreement that is unlawful. 

What should it say?

A non-compete agreement essentially states an employee will not work for a similar company in the same industry if that employee leaves his or her current job. Many employers require workers to sign this because they do not want employees to divulge company secrets after only working for the business for a year or two. 

What terms are in this agreement?

To be enforceable, the non-compete agreement has to be reasonable. It is common for the agreement to last for one to two years after an employee leaves the company. If the employer requires the employee to never work in the same industry for life, then a court will likely toss it out. Additionally, a court will judge the agreement on the geographic area it covers. Employers should also consider whether certain employees will even have access to trade secrets because, if they will not, then there is no reason to put an agreement in place. 

What are the benefits?

Employers tend to benefit the most from such agreements. They can rest easy knowing employees will not join a company, learn secrets and immediately quit to tell those secrets to a direct competitor. However, employees should be able to benefit, too. That is why most employers will include provisions saying workers will enjoy routine promotions or raises at regular intervals if they stay with the company. 

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  • Paul Faith David Ledyard Distinguished AV | Peer Review Rated | LexisNexis Martindale-Hubbell | For Ethical Standards & Legal Ability
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