Key employees are often asked (required) to agree to non-compete and other restrictive covenants (non-solicitation, for example) as a condition of their initial employment, or sometimes, their continued employment. Although restrictive covenants in the context of a person's employment are disfavored by the courts, they are fully enforceable if they are reasonably limited in temporal and geographic scope. On the flip side, if the restrictive covenant is missing one or the other of the limitations, or one is reasonable and the other is not...the entire agreement will be found to be unenforceable. Have an Arizona employment lawyer review the restrictive covenants you are using to determine if they are likely to be held enforceable.
What is reasonable? Context makes all the difference. A "reasonable" temporal and geographic scope is one that is no greater than necessary to protect an employer's legitimate business interests. In other words, how long does it take an employer to find, hire, train and develop a new employee to the level of the employee whose employment was terminated? That's a "reasonable" time.
Practically speaking, "reasonable" to an employer should be "as long as possible," especially when the departing employee has extensive knowledge of an industry, product, process or proprietary information. In addition, it is often difficult to estimate with any certainty how long it will take to locate and train key employees.
So, how can an employer craft enforceable restrictive covenants that provide maximum protection against competing ex-employees? In Part II, I will discuss the "blue pencil" rule, severability clauses and the concept of "step down" provisions, three key concepts a sophisticated employer should know about when creating restrictive covenants that a court will find to be enforceable.
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