Unreasonable Non-Compete

I have a young friend who works for a Payday Loan company. She told me her location was robbed a gunpoint last week and that she is very fearful of working there now. She said since the company discontinued using onsite security guards, like all the other payday loan companies do, she feels she has no protection. I suggested she go work for one of the other companies but she said she can't because she had to sign a non-compete agreement and it states she can't work for another payday loan company for one year if she leaves her job. Is this non-compete agreement valid? They are not only not giving her anything in exchange for signing, they are not protecting her in this risky dangerous work environment. They used to have a security guard inside the premises at all times during open hours but decided to cut corners and stopped this practice. She is a young single mother and needs a job and would like to go to work for a different payday loan company who has security protection. What can she do?

1 answer  |  asked Jun 18, 2008 5:13 PM [EST]  |  applies to Arizona

Answers (1)

Francis Fanning
Non-compete may not be enforceable

Arizona, like most states, views not-compete agreements as anti-competitive and restrictive of an employee's right to pursue his or her chosen occupation. Although the courts will enforce these agreements if they are within certain parameters, there are three things necessary for the agreement to be enforceable. First, the restriction has to be necessary for the protection of the employer's legitimate interests. I don't know why an employee at a payday loan company could pose an undue threat of unfair competition by going to work for another payday loan company. But the employer may have an argument based upon the duties of the position. Second, the agreement must be reasonably restricted as to geographic scope. With the proliferation of payday loan companies, it is unlikely that your friend serviced customers outside the neighborhood where her workplace is located, so a restriction that covers all of Maricopa county would probably be too broad. Finally, the agreement must extend for a reasonable period of time. The courts look at the issue of how long it would take for the employer to find and train a suitable replacement to fill your friend's position. If she learned the job in a matter of weeks, a one year restriction would probably be unreasonably long, since the employer could replace her and have her replacement doing the job much sooner than that.
I would recommend that your friend consult with an attorney and have the attorney read the agreement and discuss these issues with her. These agreements are not self-enforcing, and many employers do not bother to enforce non-compete agreements even if they are breached. On the other hand, prospective employers may withdraw job offers if they fear being dragged into a lawsuit by hiring someone who has signed such an agreement. Your friend has to weigh the risks of whatever decision she makes. It is worth a few hundred dollars to discuss the specifics of the agreement with an experienced employment attorney.

posted by Francis Fanning  |  Jun 18, 2008 7:42 PM [EST]

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