This Month Only! >> $20 off and a FREE SHRM tote with your membership and code TOTE2018!
Sign up for free email newsletters and get more SHRM content delivered to your inbox.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 12 cities across the U.S. this spring.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
Arkansas has joined the list of states that allow “blue-penciling” of employment contracts by a court.
Gov. Asa Hutchinson signed legislation (Act 921) allowing a court to enforce the reasonable parts of a noncompetition agreement, while deleting the overbroad, unenforceable provisions, rather than striking down the entire agreement. The new law, signed on April 1, 2015, is scheduled to take effect on Aug. 6, 2015.
Under Act 921, a covenant not to compete will be enforced if the agreement is ancillary to an employment relationship or part of an otherwise enforceable employment agreement or contract to the extent that:
1. the employer has a protectable business interest (such as trade secrets, customer lists, confidential information, intellectual property, customer lists, goodwill with customers, knowledge of business practices, methods, profit margins, costs, and other confidential information that increases in value by not being known to a competitor, training, and “other valuable employer data that the employer has provided to an employee that an employer would reasonably seek to protect or safeguard from a competitor”); and
2. the noncompete agreement is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest.
Further, Act 921 states that the absence of a specific or defined geographic descriptive restriction in a noncompete agreement does not make the agreement overly broad if the agreement is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer.
Moreover, under the new law, courts are given the authority to determine the reasonableness of the agreement and “shall” reform overly broad covenants. Prior to enactment of this statute, Arkansas did not allow blue-penciling, and a noncompete agreement had to be valid as written — the court could not narrow the overbroad provision. Employers doing business in Arkansas now have some statutory guidance, whereas before, it was “your guess is as good as mine.”
Now, by statute, continued employment is sufficient consideration for a covenant-not-to-compete. In addition, a post-termination restriction of two years is presumptively reasonable as to length of time, unless the facts and circumstances of a particular case clearly demonstrate that it is unreasonable compared to the employer’s protectable business interest. Damages and injunctive relief also may be awarded, where appropriate.
The act, however, does not apply to non-solicitation, recruitment or hiring of employees, confidentiality agreements, nondisclosure agreements, or to other terms and conditions of an employment agreement; the existing common law would still apply to those provisions. In addition, the law excludes from coverage employees who hold professional licenses in medical fields.
Under the new law, employers have more flexibility in drafting noncompete provisions with the understanding that, if necessary, a court can modify a provision rather than invalidate the entire contract. Common law principles will still apply in terms of allowing measures to protect business interests.
Furthermore, an employer may find a broader scope allowed on geographical restrictions. With the rapid pace of technological advancements, courts have begun leaning that way, but not having been able to modify the terms of an agreement, have invalidated agreements in their entirety because their scope was not sufficiently defined.
Since the act does not provide for retroactive application, employers wishing to present new or modified agreements to employees should do so after the act becomes effective to benefit from the act.
Jackson Lewis represents management exclusively in workplace law and related litigation. Republished with permission. © 2015 Jackson Lewis. All rights reserved.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
CA Resources at Your Fingertips
SHRM’s HR Vendor Directory contains over 10,000 companies