AZ NonCompete Enforceability wrt Considerations
I read, "All states that allow the enforcement of non-compete agreements require that the agreement be supported by adequate consideration, or a bargained-for exchange. Most states find that the offer of employment provides sufficient consideration for a non-compete agreement. But in some states, failing to have the employee execute the agreement at the time of hire may render the agreement unenforceable. This is so because some states view an employer's promise of continued "at-will" employment as illusory and, therefore, not sufficient consideration. Even in the states where continued at-will employment may be sufficient consideration, the amount of time in which the employee remains employed with the employer may be an issue.".
AZ is an at will state. At one point I was advised that consideration for non-compete was required for its enforceability. Consideration was upon hire OR post hire raise/promotion/other benefit. I have been at my employer 10 mos. They recently had an employee go to a competitor and HR is now asking that I sign a non-compete. I have not received any type of consideration. Am i Required and is it enforceable.
Answers (1)
Consideration is required for any contract to be enforceable. The question is what constitutes adequate consideration. You are correct that when a noncompete is presented at the time employment is offered, the offer of employment itself is sufficient consideration to support the noncompete. The tricky question is whether a noncompete required by an employer after employment has begun requires some additional consideration. There is one Arizona decision that faced this question and gave a rather unsatisfactory answer. The court said that in that case, since the employer continued to employ the employee for several years after the agreement was signed, that adequate consideration was given. The problem with this analysis is that the adequacy of the consideration is supposed to be determined as of the time the contract is made, and there was no promise of continued employment in that case. Another case that did not deal with a noncompete but with a different issue said that continued at-will employment was not sufficient consideration to support a modification of an existing contract.
To answer the question you asked, you are certainly not required to sign a noncompete agreement. On the other hand, you are an at-will employee, so your employer may well decide to terminate you for refusing to sign, and you will have no recourse. If you sign the agreement and later leave, the question whether it is enforceable will depend not only on whether consideration was adequate but on other factors, including whether the agreement was necessary to protect a legitimate interest of the employer, whether it is reasonable as to length of time and geographic scope, and whether your activities actually violated the agreement.
posted by Francis Fanning | Aug 26, 2008 1:16 PM [EST]
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