When you take a job in the state of Arizona, you may be asked to sign a non-compete agreement. If you are a business owner with a job to offer, you may use a non-compete agreement to protect your interests and your proprietary information.
No matter which side of the employer/employee relationship you are coming from, it is important to understand what non-compete agreements are, how they are used, and how they can benefit both individual employees and business owners. Here are some of the key things to understand about non-compete agreements in the state of Arizona.
What Are Non-Compete Agreements?
Non-compete agreements are commonplace in the state of Arizona, and in many different industries. These agreements limit the ability of the covered employee to seek a similar position with a competing firm and can be put to a wide variety of uses. Here are a few examples.
A radio station may require its on-air personalities to sign non-compete agreements when they come onboard. That non-compete agreement and its associated enforcement mechanism are designed to protect the media outlet should it parts ways with its best talent.
The owner of an oil exploration firm may use a non-compete agreement to prevent their employees from accepting jobs with their key competitors. Existing workers may be privy to proprietary information, and going to work for a competitor could put their current employer at a disadvantage.
How Non-Compete Agreements Can Protect Trade Secrets
From the smallest startups to the largest multinational employers, businesses in Arizona are home to many valuable trade secrets. It may have taken decades to develop these trade secrets to the point of financial viability, but it takes only a minute to lose the value of that information.
One of the biggest reasons for adopting and enforcing a non-compete agreement is to prevent the loss of trade secrets and other proprietary information. Preventing employees from trading on inside information or selling the company’s secrets to the high bidder is undoubtedly in the best interest of the employer, and it is one of the most significant benefits of using a non-compete agreement for new hires.
Enforcing Non-Compete Agreements
Some people question the enforceability of non-compete agreements in Arizona, especially since it is a right-to-work state. It is important to note, however, that the right-to-work status does not have an impact on the enforcement of quality non-compete agreements.
As long as the non-compete agreement is properly structured and disclosed at the time of hiring, there should be no impediment to its enforcement. If you are hiring, it is important to have your non-compete agreement reviewed by an employment law attorney, as that is the best way to avoid unpleasant surprises down the road.
The non-compete agreement must meet four criteria to be enforceable in the state of Arizona. They are:
- The non-compete agreement must have a legitimate business purpose
- The employee must have received a benefit from the non-compete agreement
- The period and scope of the non-compete agreement must be reasonable
- The non-compete agreement may not violate public policy
Legitimate Business Purposes for Non-Compete Agreements
The primary factor in determining the enforce-ability of a non-compete agreement in the state of Arizona is whether it serves a legitimate purpose and that the employer has valid reasons for using one.
For instance, the business may use a non-compete agreement to prevent its carefully guarded trade secrets from being lost to a competitor. It may also use a non-compete clause to protect proprietary pricing information and other valuable pieces of intellectual property.
Benefits of Non-Compete Agreements for Employers
There are several potential advantages of non-compete agreements for companies in the state of Arizona. It is important for business owners to protect their rights, and their proprietary information, when hiring workers, and a non-compete agreement is designed to do just that.
Non-compete agreements can effectively keep current employees on the job by limiting their ability to go to work for competing firms. In that way, the non-compete agreement helps to reduce employee turnover, lowering the cost of recruitment, training and retention in the process.
A non-compete agreement can also protect the confidential and proprietary information held by the firm, which is particularly significant in knowledge-based industries like IT and healthcare. Without a non-compete agreement, employees are free to gather valuable information and trade on what they know, even if that means working for a competing firm. The non-compete agreement limits those employees’ actions and reduces the value of the knowledge in their heads accordingly.
Benefits of Non-Compete Agreements for Employees
For the non-compete agreement to be enforceable in the state of Arizona, it must have some concrete benefits for the employee in question. To incentivize an employee to sign the agreement, the employer will often offer something of value, like a raise, a promotion or a bonus. These enticements are usually sufficiently beneficial to the employee, and so can be enforced.
If you are seeking a new job with an Arizona-based employer, you could be asked to sign a non-compete agreement as a condition of employment. If you are currently working for an Arizona firm, your boss may ask you to sign a non-compete agreement, offering a raise, promotion or bonus as an enticement.
If you are the business owner, you may use a non-compete agreement to protect your interests and shield your proprietary information from competitors. No matter what the situation, understanding what non-compete agreements are, how they work and what it takes to enforce them, is valuable information to have.
Call our Employment Law team at (480) 464-1111 to discuss your case today.