9

When I started a new job back in July of 2017, I signed a contract that had the following bindings or restrictions if I was ever to leave the company:

  • Cannot work for a competitor within 25 miles of current companies location for the next two years
  • Cannot offer my services to any organization within 25 miles of current companies location for the next two years

Now, when mentioned “my services” this can be related to my profession of website design.

This contract seems incredibly binding, 2 years in length, and I’m looking to see if it would actually hold up in an Arizona court.

  • What does your company do and what services do they provide? What is your role (i.e. internal work or work for customers). – sharur Aug 6 '18 at 19:26
  • I am a web Designer, and the company offers website design, software development, and IT services – Alex S. Aug 6 '18 at 19:36
  • Unfortunately, I think the contract is likely to be upheld. You are potentially a direct competitor, so that's a legitimate business interest and their geographic and time restrictions seem reasonable. – sharur Aug 6 '18 at 19:43
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    Just as a note in the future, I would not have signed this unless a clause was added to specifically restrict going after current customers, customers within the past 12 months, or customers with open bids at the time of termination. This means you won't work with their customers but you can still work. I think it is unreasonable to restrict all work in the field, and a judge may side with you on that. – Ron Beyer Aug 6 '18 at 22:40
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    @Andy: miles not minutes; but the reasonableness of that restriction is up to the trier of fact, individuals can have differing opinions (for example, I practically do that commute every work day, and I don't find it unreasonable at all). – sharur Aug 6 '18 at 23:25
5

Arizona recognizes non-compete agreements. Taser Intern., Inc. v. Ward, 231 P.3d 921 (2010) reflects the relevance of the existence non-compete agreement.

However, the mere existence of a non-compete clause does not guarantee it will be judicially enforced or recognized. The not-binding opinion Treeline Design Group, Inc. v. Gonshorowski reflects an instance where a covenant not to compete for two years [after termination of employment] is unreasonable and unenforceable. In line with the other answer, the Treeline decision states that

determining the reasonableness of a covenant not to compete is a fact-intensive inquiry

For additional Arizona cases related to non-compete agreements, search for non-compete at leagle.com.

3

You need to hire an attorney to deal with your specific situation. I won't offer a judgment of the likelihood that you would prevail in court, but I will point to some basic principles that suggest there could be a problem with the agreement. The case of Orca Communications Unlimited, LLC v. Noder is relevant for Arizona law. Some relevant principles spelled out in that case, with numerous citations are that

"Restrictive covenants which tend to prevent an employee from pursuing a similar vocation after termination of employment are disfavored" and are strictly construed against the employer..A restrictive covenant is unreasonable and will not be enforced "(1) if the restraint is greater than necessary to protect the employer's legitimate interest; or (2) if that interest is outweighed by the hardship to the employee and the likely injury to the public."...The employer bears the burden of proving the extent of its protectable interest

As described, the agreement doesn't just prohibit using existing contacts, or exploiting trade secrets, it prohibit a person from engaging in their profession within a 25 mile area.

Non-compete and non-solicitation restrictions are enforceable if they are "no broader than necessary to protect the employer's legitimate business interest." An employer does have a legitimate interest in restraining a former employee "from appropriating valuable trade information and customer relationships" acquired during employment. But because an employer may not eliminate competition per se, a restrictive covenant that goes beyond protecting a legitimate business interest and prevents a former employee from using skills and talents learned on a former job is unenforceable

3

IANAL; I am not your lawyer. If you want specific legal advice, retain a lawyer.

In general, non-compete clauses in employment contracts need four things (Arizona source: https://www.allenlawaz.com/non-competes-legal-arizona/):
1) They need to be reasonable in their terms
2) They need to be limited geographically
3) They need to be limited temporally
4) They need to be limited to "legitimate business interests".

The contract described is limited both temporally and geographically (to two years and 25 miles, respectively).

These limitations seem very reasonable to me (noting that a) I am not a lawyer, and b) I am from California, specifically Southern California, land of the freeway, and I commute 15-20 miles each way by choice, and it takes me about half an hour, which is mostly due to traffic, rather than distance), and likely to pass muster on those grounds. Note that I've looked up several "sample non-compete clauses" online to answer questions and two years duration is commonplace. It seems to be viewed as "not long enough to seriously affect one's career, but long enough that you won't immediately set up or join an adjacent competitor", which seems to be the point.

Now, the last question is whether this non-compete serves a "legitimate business interest". You mentioned in the question that your work is primarily website design, which is something that can go in either direction, based on the nature of your work and the nature of you employer's business and offerings. If your work is internal (e.g. you work on your own company's website) and your employer's business products and/or services are unrelated to offering websites (e.g. they are a car dealership) then you are more likely to prevail. If your work is external, e.g. your company is in hosting or PR and they provide web design as a product or service, the less likely you are to prevail and the more likely the contract is to be upheld.

Which category you are in is a question of fact for the finder of fact (judge or jury) to determine.

EDIT: Based on your response to my comment query, it seems likely to be upheld, as you would (potentially be) a direct competitor.

  • I haven't really looked at Arizona cases, but I don't think I've ever heard of any case anywhere that treats preventing direct competition as a legitimate business interest. Do you see any cases saying that would be enough? – bdb484 Aug 7 '18 at 4:54

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