Arkansas By Way of Statute Joins the Growing Number of States Allowing Courts to “Blue Pencil” Covenants Not to Compete — Our Chicago Non-Compete Agreement Lawyers Litigate Covenant Not to Compete Cases throughout the Chicago Area

Arkansas has now become a state that permits a court to “blue-penciling” of a non-compete agreement.

Governor Asa Hutchinson signed a statute (S.B. 998 or Act 921) permitting courts the flexibility to enforce those portions of a non-competition agreement that are reasonable and to delete overbroad, unenforceable provisions.  Arkansas courts no longer have to strike down the entire covenant not to compete simply because one portion is unreasonable.

Under the wording of the Act, 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:

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

the non-compete 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 non-compete 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 non-compete 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.

Also the Act, states that continued employment is sufficient consideration for a covenant-not-to-compete. In addition, a post-termination restriction of two years is presumed reasonable as to time, unless the facts and circumstances would make it unreasonable when compared to the employer’s protectable business interest. Damages and injunctive relief can be awarded by a court, if deemed 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 still controls. Further, the statute excludes from its coverage employees who hold professional licenses in medical fields.

The new law gives employers more flexibility in drafting non-compete provisions with the understanding that, if needed, a court can modify a provision rather than declare the entire contract void and uneforceable.  The common still applies as far as permitting steps to protect other types of business interests.

Furthermore, an employer may find a broader scope allowed on geographical restrictions. With the quick changes in technologically, courts have started to discover that they need the ability to alter an agreement, but shouldn’t throw out the baby with the bathwater and strike down an entire non-compete agreement.

Our Chicago and Naperville Non-Compete Agreement Lawyers Handle Covenant Not to Compete Lawsuits Throughout the Chicago Area.

Our Chicago non-compete and non-solicitation agreement attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.

Lubin Austermuehle handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business dispute lawyers have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.

DiTommas-Lubin a Chicago business dispute litigation law firm represents both plaintiffs and defendants in Dupage, Cook, Kane and Lake Counties in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Based in Oakbrook Terrace and downtown Chicago, our Naperville and Wheaton non-compete clause attorneys and lawyers take cases from Aurora and Elgin and many other cities throughout Illinois, as well as in Indiana, Wisconsin and the entire United States. To learn more or set up a free consultation, please contact one of our Chicago business dispute attorneys through the Internet or call toll-free at 630-333-0333 today.


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