Arkansas Non-Compete Agreement
Arkansas enforces employee non-compete agreements that protect a legitimate business interest and are reasonable in time and scope. Attorney review available.
Introduction
Arkansas rewrote its non-compete law in Act 921 of 2015, now Arkansas Code Section 4-75-101, which lets a business hold a former employee to a promise not to compete for a set time and area so long as it guards a protectable business interest. Arkansas enforces employee non-competes, but only within limits set by statute. Under Arkansas Code Section 4-75-101, enacted by Act 921 of 2015, a covenant that is ancillary to an employment relationship is enforceable to the extent the employer has a protectable business interest and the restriction is limited in time and scope in a manner not greater than necessary to defend that interest. The statute lists what counts as a protectable business interest, including trade secrets, customer lists, goodwill, business methods, and confidential data the employer gave the employee. A post-termination restriction of two years is presumptively reasonable as to length of time, and the absence of a defined geographic area does not by itself make the covenant overly broad if the time and scope are reasonable. If a court finds the restrictions unreasonable, it does not throw the whole clause out: the statute directs the court to reform, or blue-pencil, the covenant to make it reasonable and then enforce it as rewritten. Continued employment is sufficient consideration, so a new benefit is not required. Arkansas has no salary or income threshold. Separate rules apply to physicians and other Title 17, Subtitle 3 license holders, to the sale of a business, and to non-solicit and confidentiality agreements. This page explains Arkansas's rule and offers a template scoped to those limits. It is a state-law overview, not a promise that any given clause will hold up.
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Key Things to Know
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Arkansas Code Section 4-75-101, enacted by Act 921 of 2015, makes a non-compete, an employee's promise not to compete with the business after leaving, enforceable to the extent it protects a business interest and stays no broader than necessary in time and scope.
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Arkansas enforces a non-compete under Arkansas Code Section 4-75-101 if it is ancillary to an employment relationship, the employer has a protectable business interest, and the restriction is limited in time and scope in a manner not greater than necessary to defend that interest.
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Arkansas has no salary or income threshold for a non-compete. Enforceability turns on the protectable business interest and reasonable time and scope, not on how much the employee earns, so do not import another state's wage floor.
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A post-termination restriction of two years is presumptively reasonable as to length of time (Section 4-75-101(d)), and the lack of a defined geographic area does not by itself make the covenant overly broad if the time and scope are reasonable (Section 4-75-101(c)).
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Continued employment is sufficient consideration for a non-compete in Arkansas (Section 4-75-101(g)); an employer does not have to give a new bonus or benefit, and the statute sets no advance-notice-before-signing requirement.
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If a covenant is unreasonable, an Arkansas court must reform, or blue-pencil, it to the extent necessary to make it reasonable and then enforce it as reformed (Section 4-75-101(f)), rather than voiding the whole clause.
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Section 4-75-101 does not apply to Title 17, Subtitle 3 professional-license holders such as physicians, to the sale of a business or franchise, or to non-solicit and confidentiality agreements; employers may also protect data through the Arkansas Trade Secrets Act (Section 4-75-601 et seq.).
Key decisions before you file
Before you file a Non-Compete Agreement in Arkansas, a few decisions shape the document: which option to choose and what each one means. The Non-Compete Agreement guide walks through them.
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Arkansas Requirements for Non-Compete Agreement
Enforceable Within Statutory Limits
In Arkansas an employee non-compete is enforceable under Arkansas Code Section 4-75-101 if it is ancillary to an employment relationship, the employer has a protectable business interest, and the restriction is limited in time and scope in a manner not greater than necessary to defend that interest. A covenant that reaches further than needed is not automatically valid.
No Income Threshold
Arkansas has no salary or income threshold that makes a non-compete valid or invalid. Enforceability turns on the protectable business interest and reasonable time and scope under Section 4-75-101, not on the employee's compensation. Do not rely on any other state salary figure for an Arkansas worker.
Protectable Business Interest Required
The employer must have a protectable business interest for the covenant to stand. Section 4-75-101(b) lists what counts, including trade secrets, intellectual property, customer lists, goodwill with customers, knowledge of business practices, methods, profit margins, costs, confidential business information, employee training, and other valuable data the employer provided to the employee.
Two-Year Duration Presumption
A post-termination restriction of two years is presumptively reasonable as to length of time under Section 4-75-101(d), unless the facts of a particular case clearly show two years is unreasonable compared to the employer's protectable business interest. A longer term is not automatically void but is harder to defend and may be reformed down.
Geographic Limit Not Always Required
Under Section 4-75-101(c), the lack of a specific geographic restriction does not by itself make a covenant overly broad if the time and scope are limited in a manner not greater than necessary. Reasonableness is judged on the nature of the protectable interest, the geographic scope of the business and whether a geographic limit is feasible, whether the restriction is limited to a specific customer group, and the nature of the business.
Continued Employment Is Consideration
Arkansas Code Section 4-75-101(g) provides that an employee's continued employment is sufficient consideration for a covenant not to compete, so an employer does not have to give a separate bonus or benefit to support the clause. The statute sets no advance-notice-before-signing requirement in the employment context.
Courts Reform, Not Void
If a covenant's restrictions are unreasonable and impose a greater restraint than necessary, Section 4-75-101(f) directs the court to reform, or blue-pencil, the agreement to the extent necessary to make the limitations reasonable and then enforce it under the reformed terms. This reversed the older Arkansas rule under which an overbroad covenant was often struck entirely.
Carve-Outs and Trade-Secret Alternative
Section 4-75-101 does not apply to Title 17, Subtitle 3 professional-license holders such as physicians (Section 4-75-101(j)(2)), to the sale of a business or franchise (Section 4-75-101(h)), or to non-solicit, confidentiality, and nondisclosure agreements (Section 4-75-101(i)), which are governed by common law. Employers may also protect confidential data through the Arkansas Trade Secrets Act (Section 4-75-601 et seq.).