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Updated August 08, 2023

An Arizona non-compete agreement allows for the restriction of an employee working in a specific industry to perform the same work for another company. There are main restrictions are the terms cannot be written too broadly and for an unreasonable amount of time. For the sale of a business, the courts apply stricter rules due to the limited amount of “time and space.”

Laws

Legally Enforceable?
- Legitimate Interest
Reasonable Test
Continued Employment
Maximum Term
Blue Pencil Rule

Legally Enforceable?

Yes, non-competes are legally enforceable in Arizona, although, there are some occupational exceptions such as:

Attorneys. Law firms cannot prohibit an attorney from seeking other employment, although, the law firm is able to include a financial penalty if a lawyer violates a non-compete (William D. Fearnow v Ridenour, Swenson, Cleere & Evans, P.C. 138 P.3d 723 (2006)); and
Broadcast employees. No broadcast employer may restrict an employee of a television station/network, radio station/network (ARS 23-494);
Physicians. Licensed physicians are not explicitly prohibited but to be “closely scrutinized” and the “doctor-patient relationship is special and entitled to unique protection.” (Valley Med. Specialists, 982 F.2d at 1283 (1999)).

Legitimate Interest

There needs to be “some legitimate interest beyond the employer’s desire to protect itself from competition.” (Valley Med. Specialists, 982 P.2d at 1281 (1999))

Reasonable Test

Determining whether a non-compete is “reasonable” depends if the restraint is not:

Beyond that reasonably necessary for the protection of the employer’s business;
Unreasonably restrictive upon the rights of the employee; and
In contravention of public policy.

Source: Olliver/Pilcher Insurance v. Daniels (1985)

Continued Employment

The continuation of at-will employment is deemed to be sufficient consideration.

Source: Mattison v. Johnston (1986)

Maximum Term

There is no Arizona statute for a maximum term under a non-compete.

Three (3) years have been deemed “reasonable” for a physician (Valley Med. Specialists, 982 P.2d at 1281 (1999)) but not for employment where no “special training or education is required” (Liss v. Exel Transp. Servs. (2007)). Therefore, for jobs that require no professional license, two (2) years or less is recommended.

Although, ten (10) years were allowed for the sale of a business and restricting the seller from entering the same industry within a 100-mile radius (Gann v. Morris (1979)).