What Arizona employers need to know about proposed FTC noncompete rule

It’s no secret that employers of varying sizes and industries have long favored the use of noncompetition agreements as way to protect their businesses from employees leaving to work for competing organizations. Recently, however, the Federal Trade Commission (FTC) issued a proposed rule that would effectively ban most noncompetes.

Noncompete in Arizona

Generally speaking, whether and to what extent a particular noncompete is enforceable is governed by state law, with each state setting its own rules regarding duration, geographic limits, and scope. For example, in Arizona, noncompetition provisions are typically enforceable when they’re no broader than necessary to protect an employer’s legitimate business interests—with enforceable agreements typically being no longer than one-year in duration and no broader than a 50-mile radius from the employer’s place of business.

Arizona is also known as a “blue pencil” state, meaning that Arizona courts can “blue-pencil" (or cross out) grammatically severable, unreasonable provisions within restrictive covenants while still preserving the enforceable portions of the agreements.

Given this backdrop, many noncompetition agreement are drafted with what is known as “step down” provisions, so that even if a portion of the noncompete is struck, the employer will still be insured some level of protection.

FTC’s proposal