When is a Restrictive Covenant Overly Broad?

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When is a Restrictive Covenant Overly Broad?

Typically, a restrictive covenant is a provision in an employment agreement restricting the employee from certain activities during or after the employment period. Usually, the purpose is to protect employers from employees who might otherwise compete unfairly with their former employer after leaving, such as by taking confidential information from the employer and using it to start a competing business or join a competitor. Restrictive covenants can include non-compete agreements, non-solicitation agreements, and non-disclosure agreements.

While Arizona courts do not favor non-compete clauses in employment contracts, they are enforceable so long as they are narrowly drawn to protect only an employer’s legitimate business interests, which means they must satisfy the following requirements:

·         They are reasonable as to geographic scope.

·         They are reasonable as to duration of time.

·         They are limited to activities that the employee performed for the employer.

Arizona courts tend to look more favorably upon non-solicitation agreements, but they still must be narrowly defined and reasonable. They must restrict the employee only from using relationships that he or she formed with a previous employer to benefit a new employer or business.

Non-disclosure agreements are also easier to enforce under Arizona law because they do not restrict an employee’s ability to earn a living, such as by leaving one employer for another in the same line of work; after all, it is reasonable to expect an employee to gravitate to work that he or she already knows how to perform. A non-disclosure agreement simply prevents the employee from sharing former employer’s confidential information, or from using it in his or her new employment.

Overbreadth is typical reason for a court to find a restrictive covenant unenforceable. For instance, the covenant should protect only a company’s legitimate business interests, but should not prevent an employee from using his or her skills to work in the same field. Likewise, there must be temporal and geographical limits on restrictive covenants; a restrictive covenant cannot last forever, and the employee should be able work in the same industry if he or she moves a reasonable distance away from the employer to do so.

At Williams Commercial Law Group, L.L.P., we focus our efforts on representing your business interests throughout the duration of your case, including disputes arising from the breach or enforcement of a restrictive covenant. When you need help that only an experienced business litigation attorney can offer you, contact Williams Commercial Law Group, L.L.P., at (602) 256-9400.

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