Noncompete agreements can have a significant impact on your career opportunities after leaving a job. Many employees are asked to sign these agreements as a condition of employment, often without fully understanding the restrictions they may create.
Before signing a noncompete agreement, or if you’re concerned about one you’ve already signed, it is important to understand what these contracts are designed to do and how they may affect your future employment options.
How Do Noncompete Agreements Work?
A noncompete agreement is a contract that restricts an employee from competing against their employer after the employment relationship ends. These agreements typically prevent a former employee from working for a competitor, soliciting clients, or starting a competing business within a defined time period and geographic area.
Noncompete agreements are commonly used in industries such as:
- Healthcare
- Technology and software
- Sales and marketing
- Finance and insurance
- Broadcasting and media
- Engineering and manufacturing
- Professional services
- Research and development
- Executive and management roles
- Skilled trades and personal services
Employers often use noncompete agreements to protect sensitive business interests, customer relationships, and confidential information. However, these agreements are not always enforceable, and their validity may depend on the specific terms involved and the laws that apply.
Why Noncompetes Are Often Disfavored in the Legal System
Although certain noncompete agreements are enforceable, Arizona courts construe these agreements strictly against the employer who drafted them.
They are generally disfavored in the legal system because:
- Restraint of trade: Noncompetes limit competition and a worker’s freedom to earn a living, which conflicts with the broader public interest in an open marketplace.
- Unequal bargaining power: Employees often have little ability to negotiate the terms and may feel pressured to sign as a condition of employment.
- Impact on livelihood: An overly broad agreement can prevent a person from working in their chosen field, sometimes forcing them to leave the area or change careers.
- Potential for overreach: Employers sometimes use noncompetes to discourage ordinary competition or retaliate against departing employees.
Some states restrict them so heavily that they are functionally banned from being used.
The federal government has also made its disapproval of noncompete agreements clear in recent years. The Federal Trade Commission (FTC) voted to enact a sweeping nationwide ban on noncompetes, but a federal court struck down and vacated the rule before it could take effect.
The FTC’s effort to implement a nationwide ban ultimately did not take effect, and noncompete enforcement currently remains a matter of state law.
When Are Noncompetes Enforceable in Arizona?
Arizona enforces noncompete agreements only when they are reasonable.
Courts examine three key factors:
- Duration: The restriction must last no longer than necessary to protect the employer’s interests.
- Geographic scope: The covered area must be limited to where the employer actually does business.
- Scope of activity: The restricted work must relate to the employee’s actual role and the employer’s legitimate concerns.
The agreement must also protect a legitimate business interest (e.g., trade secrets, confidential information, customer relationships, or goodwill). An employer cannot use a noncompete simply to prevent ordinary competition or punish a departing employee.
Some noncompetes are subject to heightened scrutiny in Arizona. For example, restrictions on physicians are carefully reviewed because they can limit patients’ access to care.
Arizona law also places specific limits on noncompetes involving certain broadcasting employees.
The Blue Pencil Rule
Arizona follows the “blue pencil” doctrine. If part of a noncompete is unreasonable, a court may strike out the offending language, provided the remaining terms still make sense on their own.
Arizona courts will not rewrite an agreement or add new terms to save it. This means employers who draft overly broad agreements risk having entire agreements thrown out.
Contact the Arizona Employment Lawyers at Houk Employment Attorneys for Help Today
If you have signed a noncompete and are now wondering whether it is enforceable, an Arizona employment attorney can help.
Your lawyer can review your noncompete agreement and explain whether it complies with state law. Your attorney can also identify overly broad or unreasonable terms and advise on your options before accepting a new position.
For more information, please contact the experienced employment attorneys at Houk Employment Attorneys to schedule an initial consultation today.
Our employment law firm is conveniently located near you, with an office in Phoenix, AZ.
Houk Employment Attorneys
631 N 1st Ave Suite 101, Phoenix, AZ 85003
(480) 569-2377
