Many business owners have serious concerns about employees or contractors hurting their business after the worker leaves. A primary fear is that the worker will take confidential information or steal away profitable customers that the business owner worked hard to get!
 
Arizona case law has established that employees have a fiduciary duty to not solicit your customers to move their business to a competing company while they are employed by you. But the duty does not apply after they are fired or have quit. Additionally, contractors owe no fiduciary duties to your company at all.

Proprietary Information

Almost all of my clients collect confidential information about their customers in their normal course of business. This can include basic contact information, customer preferences, items and dollar amounts of past purchases, potential future orders, and customer business strategies and plans. It’s the quality of this proprietary information that is a significant contributor to the overall success of their business, and why this information is so attractive to a former worker looking to compete with them. 
 
Many of their workers have access to this information so that the customer can be properly serviced. The improper or unauthorized release of this data may create substantial revenue loss for my clients if those customers turn elsewhere for a similar product or service. 

Arizona Case Law

Arizona courts have ruled that a company has a protectable interest in its relationships with its customers and in its confidential and proprietary information. In plain language, this means that it’s legitimate for a company to take steps to protect their customers’ information so that others cannot use it in ways that would harm the company. 
 
Any agreement you ask your workers to sign must be narrowly-tailored to protect your legitimate business interests while not placing overly burdensome restrictions on your employee or contractor. In the event of a lawsuit, it will be your burden to prove the scope of your protectable interest.

Non-Solicitation Agreements

A Non-Solicitation Agreement restricts the future actions of a terminated worker regarding their use of your valuable proprietary information. Your company’s protectable interest has limits, however. It may be considered unreasonable to prohibit a former worker from contacting one of your customers if the worker had no contact with the customer while working for you.
 
A customer Non-Solicitation Agreement can apply only to current customers, as the courts do not see any protectable interest in former clients who have decided to no longer do business with you, or in prospective clients who have not yet decided to do so. Prohibiting your former worker from contacting these folks will result in your agreement being deemed overbroad and unenforceable.
 
Additionally, the restricted time frame and the geographic area that you define for the prohibition must be reasonable and not overly broad. While the courts support protecting your interests, over time that interest fades and you cannot restrict your former worker for an unreasonably long period of time nor restrict them from contacting customers in a geographic area that you are no longer doing business.

How does this differ from a Non-Compete?

A Non-Competition Agreement restricts your former worker from performing the job they did for you - after they no longer work for you. A Non-Compete might prohibit a freelance photographer from working as a photographer for a year after she stops freelancing for you. In essence, you would be standing in the way of her earning a living at her chosen career for a certain period of time. Courts view these agreements much less favorably than Non-Solicitation Agreements, which only restrict contact with a defined group of customers.

Key Takeaways

Arizona courts respect the valuable relationships you’ve created with your clients and permit you to protect them from former workers. But your restrictions must be reasonable, narrowly-drawn to your former worker’s specific situation, and only apply to your legitimate protectable interests. 
 
Figuring out what your Non-Solicitation Agreement should look like can be complicated. Make sure your provisions are enforceable before you have your workers sign it so that you don’t find out that its overbroad or unreasonable after your valuable customers have been poached. Feel free to schedule time to talk if I can help with this.

NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES.

By Wendy M. Anderson, Esq.
Law Office of Wendy Anderson, PLLC
480-825-4509
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