Generally speaking, a covenant not to compete , or noncompete agreement, is a promise in an employment contract not to engage in the same type of business for a stated time in the same market as the employer. When these agreements are found by courts to be unenforceable, it leaves employers vulnerable to competitors. On the other hand, when they are enforced, employees may be unable to find work in the industry in which they are most experienced.
Because of the conflicts inherent in covenants not to compete, many courts have struggled to create a rule that can be fairly applied in all circumstances. In Arkansas, courts have struggled to determine whether customer relationships are a protectable interest, and what may be included in a reasonable geographic limitation of a covenant not to compete. This article argues that Arkansas courts should enforce covenants not to compete that protect customer relationships from solicitation, and determine the reasonableness of geographic limits based on what employer interest is being protected.
The article begins by discussing the history of covenants not to compete and the factors considered by courts in evaluating the enforceability of noncompetes. Next, the article examines how Arkansas courts have addressed covenants not to compete as well as the conflicts in Arkansas case law concerning whether customer relationships are protectable and what geographic limitations are enforceable for a valid covenant not to compete. Because the current Arkansas rules governing covenants not to compete force employers to leave parts of the business unprotected from unfair competition, this note proposes clear rules which enforce covenants that preclude former employees from soliciting business from the customers of the former employer, but require covenants to have varying geographic limitations depending on whether the employer seeks to protect only customer relationships or trade secrets, training and other confidential information.
Victoria J. Malony,
Employment Law—The Elusive Enforceability of Employment Covenants Not To Compete in Arkansas,
34 U. Ark. Little Rock L. Rev. 593
Available at: https://lawrepository.ualr.edu/lawreview/vol34/iss3/5