What Exactly Does an Arizona Non-Solicitation Agreement Prevent?

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What Exactly Does an Arizona Non-Solicitation Agreement Prevent?

Arizona employers typically use non-solicitation agreements to restrict employees who have left the company from contacting clients or customers in order to solicit their business away from the former employer.  Arizona courts usually enforce non-solicitation agreements so long as they meet three requirements:

  1. The agreement protects a legitimate business interest.
  2. The agreement is reasonable in both duration and scope.
  3. The agreement does not violate Arizona public policy.

So exactly what does a non-solicitation agreement prevent a former employee from doing? Can they tell customers they are leaving? Announce where they are going? Provide new contact information? Ask a former client to contact them?  To answer these questions and more, one can look to prior Arizona court decisions for answers.

Alpha Tax Services, Inc. v. Stuart (1988) — Two employees of a tax preparation firm left to start their own company and mailed announcements to their former employer’s clients about the new company that offered discounts for using their services.  An Arizona appeals court found the former employees had violated their non-solicitation agreements since the flyers were specifically targeting their former employer’s clients and offered discounts.

Compass Bank v. Hartley (2006) — A former bank employee sent letters to his former clients providing his new address, email address, and two phone numbers.  An Arizona district court ruled this to be a solicitation since it was a targeted mailing and contained information initiating clients to contact him.

E*TRADE Financial Corporation v. Eaton (2018) — A former employee contacted his old firm’s clients by phone to provide information about his new job and new contact information, claiming that it was required by rules governing his role as a certified financial planner.  However, the former employee acknowledged that if he was unable to reach his former clients by phone, he did not send any other form of communication to convey this message.  An Arizona district court found that because the employee insisted on having live conversations with his former clients, and not following up with any other type of communication, he was likely trying to solicit business away from his former employer.

So long as non-solicitation agreements for employees who maintain direct, personal relationships with clients are reasonable in duration and scope and protect a legitimate business interest — i.e., an employer’s relationship and goodwill with its clients — Arizona courts are likely to enforce them.  Employers should also be vigilant in ensuring that employees they hire who have existing non-solicitation agreements with their former employers do not engage in prohibited solicitations.

When you are facing any type of business dispute, you need an experienced Arizona trial attorney to obtain the best possible result. Contact Williams Commercial Law Group, L.L.P., at (602) 256-9400 to speak with us about your case.

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