Rayeruss said:
What is the name of your state? Arizona
Hi, I am an employer and want to require my existing and new hires to sign a confidentiality agreement and a non-compete contract. Is this legal and does the non-compete contract work both ways?
My response:
Have you thought about what the "consideration" will be; e.g., how much you're willing to pay an employee for his signature to such a contract, and will that consideration be sufficient and worthwhile to the employee?
Noncompete agreements are good for companies but generally disfavored by the courts in Arizona. What it comes down to is that in Arizona, case law already has established that an employer cannot restrict an employee from earning a living. The employer, however, can require that the employee not compete directly in specific aspects of business for an agreed upon length of time.
In some industries, especially those in which there is a lack of readily available talent or in which there is great investment in specific niches of training, employers have a vested interest in making certain that employees don't jump. The thing is, in Arizona, there is common law that applies and most courts will look to that rather than a noncompete agreement.
They're generally regarded as restraining competition, or restraining an employee from making a living. So the general rule is that restraint cannot go beyond what is `reasonably necessary' to protect the employer's business.
The issue you need to bear in mind is that such an agreement cannot restrain an individual's ability to use general skills or talents. If someone is a good engineer or salesperson, you can't keep them from doing that.
The keys to legal restriction have to do with geography and the duration of the restriction. If your primary business is in Maricopa County, you are not going to be able to keep your employee from working anywhere in Arizona. You may be able to limit their availability in Maricopa County for a limited amount of time.
Arizona courts have generally interpreted an appropriate duration of restrain to the be the length of time an employer may need to hire new talent, inform the appropriate clients and so on.
One year has generally been held to be a reasonable period but not in every case. The same elements apply in sales, in which a company may wish to protect its contracts with key clients through asking sales staff to sign nonsolicit agreements. The issue in that is that such agreements cannot keep clients from willingly following a trusted representative from one similar firm to another.
There is a way for employers to hold on to valued employees without insisting on noncompete or nondisclosure agreements. You need a careful, written policy, and any kind of noncompete or nondisclosure agreement needs to be specific for each individual employee.
So you need legal advice in drafting the agreements.
IAAL
