An Arkansas non-compete agreement is a contract that prevents an individual, often an employee, from competing with a business owner. This document often goes into effect after the employment has terminated. A non-compete agreement ensures those working closely with the company don’t use the information obtained during to gain an advantage over or harm the owner’s business, as it is often the case the employees and contractors will be given access to sensitive information and specialized training to perform their work. Non-compete agreements are also used in the sale of a business to prevent the original owner from creating a similar company in the same geographic area.

Contents Enforceability in Arkansas When it IS Enforceable When it’s NOT Enforceable Maximum Time Period Geographical Area Consideration Sources Related Forms (2) Frequently Asked Questions (FAQ)

Enforceability in Arkansas

Non-compete agreements are enforceable provided that the employer has a protectable business interest (e.g., trade secrets, intellectual property, customer lists, etc.) and that the contract is limited to the scope necessary to protect their interest.^[1]

When it IS Enforceable

• Reasonable scope. The agreement does not go beyond what is required to defend the employer’s protectable business interests.
• Protectable business interests. The agreement may be enforced if the employee has had access to:
  • Trade secrets;
  • Intellectual property;
  • Client lists;
  • Business know-how or methods;
  • Profit margins or costs;
  • Proprietary information;
  • Employer training; or
  • Information that would decrease in value if disclosed to other parties.^[2]

When it’s NOT Enforceable

• Excessive restrictions. The agreement places more restrictions than necessary to safeguard the employer’s business interest.
• Medical professionals. Individuals licensed in any profession under Title 17, Subtitle 3 of the Arkansas Code cannot be restricted by a non-compete clause.^[3][4]

Maximum Time Period

Two (2) Years. Two (2) years after employment is considered fair unless a particular circumstance demonstrates two (2) years is insufficient to preserve the employer’s business interest.^[5]

Geographical Area

A non-compete agreement that does not define a geographical range is not considered unreasonably general if the contract is fair in time and scope.^[6]

Consideration

The continued employment of the employee is adequate consideration for a non-compete agreement.^[7]

Sources

1. Ark. Code § 4-75-101(a)
2. Ark. Code § 4-75-101(b)
3. Ark. Code § 4-75-101(j)(2)
4. Title 17, Subtitle 3
5. Ark. Code § 4-75-101(d)
6. Ark. Code § 4-75-101(c)
7. Ark. Code § 4-75-101(g)
8. Ark. Code § 4-75-101(f)

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Related Forms (2)

Arkansas Non-Disclosure Agreement – Used to ensure information exchanged between two (2) parties remains confidential.

Download: PDF, Word (.docx), OpenDocument

 

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Arkansas Non-Solicitation Agreement – A legal agreement that forbids employees from interacting with clients and coworkers for personal gain.

Download: PDF, Word (.docx), OpenDocument