Sometimes, the connection between an employee and employer does not end after a job termination, such as when an employee signed a non-compete or non-solicitation agreement that affects their future employment. There are many differences between non-compete vs. non-solicitation provisions (also called restrictive covenant provisions). Choosing the right provision is critical when deciding which is the right tool for protecting your professional future.
At Shields Petitti & Zoldan, PLC, we regularly advise businesses and workers on Phoenix employment agreements. With decades of combined experience, we want to help ensure your working relationships protect you and run smoothly. Contact us today for help.
What Is a Non-Competition Agreement?
A non-compete agreement restricts an employee from working for a competitor or starting a competing business after leaving a job. Employers use these clauses to protect client relationships, trade secrets, and investments in training.
In Arizona, a non-compete agreement typically includes:
- A time restriction to keep the former employee from working for competitors for a certain period of time,
- A geographic restriction that prohibits the former employee from competing with the employer in specific locations, and
- A scope of work restriction that prevents the former employee from working the same job or working in the same type of business.
If you are an employer, agreements like this can take the worry out of what will happen if an employee leaves after learning your business’s inner workings and secrets. On the other hand, an employee may have concerns about how they will make a living after signing a contract.
What Is a Non-Solicitation Clause?
When it comes to the difference between non-compete and non-solicitation agreements, a non-solicitation clause is a restrictive covenant that is more narrowly tailored. Instead of preventing a person from working for a competitor, a non-solicitation clause prevents them from trying to do business with clients, vendors, or employees of their former employer.
A standard Arizona non-solicitation agreement may restrict a former employee from:
- Contacting or servicing clients they worked with during their employment,
- Recruiting employees to join a competing company, or
- Soliciting vendors or other business partners.
Now that you know the basics, let’s talk about what might make one harder or easier to uphold in court.
Non-Compete vs. Non-Solicitation Enforceability
Employers and employees can sign as many agreements as they want, but those agreements do not mean much if they are unenforceable. Below are factors that can affect the enforceability of non-solicit and non-compete agreements.
Non-Compete Agreements
When courts review a non-compete agreement, they focus on whether the restrictions are reasonable. In general, a non-compete:
- Must be limited in time and geography,
- Cannot be broader than necessary to protect legitimate business interests, and
- Not prevent someone from earning a living without good cause.
Arizona courts strike down non-competes that are too broad, such as those prohibiting someone from working in a location where the employer does little business. A court might also invalidate a provision that prevents a former employee from working longer than is necessary to find or train a replacement for the employer. Courts may also refuse to uphold an agreement when a former employee had no access to trade secrets or other confidential information.
Non-Solicitation Agreements
A court is more likely to enforce a non-solicitation agreement if its:
- Provisions have reasonable time limits,
- Limitations to the employee’s contacts with whom they had meaningful relationships
- Provisions have reasonable geographic restrictions, and
- Restrictions are just enough to protect the employer’s legitimate business interests.
Depending on the facts, a court might not enforce an agreement restricting an employee for a year or longer. Or, a court might throw out an agreement that prohibits an employee from talking to someone with whom they have not spoken before. A legitimate business interest has to be more than just an interest in avoiding competition.
Which Clause Is Best for an Employer’s Needs?
When comparing non-competes and non-solicitations, the right choice depends on an employee’s role in the workplace and the nature of the employer’s business.
If your goal is to protect customer relationships and your investment in other employees, a non-solicitation agreement may be more practical. It allows you to target specific risks without overreaching. A non-compete may be more appropriate for employees who regularly work with confidential information or receive specialized training from you. Consider how much time and how big a geographic reach are necessary to protect yourself.
We can help employees protect themselves in contract disputes and negotiations. If you run a business, we can help you draft favorable agreements that can survive in court.
Contact Us
If you are drafting or reviewing Phoenix employment agreements, you want them to be correct. Our award-winning attorneys at Shields Petitti & Zoldan can help you evaluate whether a non-compete vs. non-solicitation agreement best fits your needs. We can also ensure that your agreements comply with Arizona law and protect your rights and interests.
Call us or contact us online to schedule a consultation today.
Attorney Michael Zoldan provides legal counsel to individuals and small businesses throughout Arizona. Mr. Zoldan’s practice is based on aggressive and detail-oriented representation, focusing on employment discrimination, wage and hour disputes, harassment, and wrongful termination. Prior to forming Shields Petitti & Zoldan, Mr. Zoldan worked for numerous law firms where he had an opportunity to hone his litigation skills by working on multiple litigation cases at a time with some of the most skilled litigators in the state.
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