Employee Non-Compete Agreement and Enforceability Memo — Arkansas

ARKANSAS Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

Part A — Enforceability Memo

MEMORANDUM

To: [________________________________]
From: [________________________________], Arkansas Bar No. [_____]
Date: [__/__/____]
Re: Enforceability of Non-Compete Under Ark. Code Ann. § 4-75-101 — [EMPLOYEE NAME]

I. Executive Summary

This memorandum analyzes the attached non-compete under Ark. Code Ann. § 4-75-101 (2015) as amended by Act 232 of 2025. The 2015 statute is materially more employer-friendly than Arkansas pre-2015 common law and provides mandatory reformation. However, the statute does not apply to (a) sale-of-business agreements, (b) non-solicits/NDAs, or (c) Title 17 Subtitle 3 medical professionals. Physicians are now subject to a categorical ban under Act 232 of 2025.

Bottom-line assessment: ☐ Likely enforceable as drafted ☐ Likely enforceable after statutory reformation ☐ Void (physician under Act 232) ☐ Governed by pre-2015 common law

II. Threshold — Statute or Common Law?

III. Statutory Analysis (§ 4-75-101) — Applied

IV. Common-Law Analysis (Pre-2015, Healthcare, Sale-of-Business)

For agreements outside the statute, apply Statco Wireless, LLC v. Sw. Bell Wireless, LLC and Bicak: (1) valid interest to protect; (2) geographic restriction not overly broad (must be tied to actual operations); (3) reasonable time limit. No mandatory reformation under common law — an overbroad covenant is voided in its entirety. See Duffner v. Alberty, 19 Ark. App. 137 (1986) (voiding 30-mile / 1-year restriction on orthopedic surgeon).

V. Physician Ban — Act 232 of 2025

Effective approximately mid-July 2025, § 4-75-101(k) provides: "A covenant not to compete agreement that restricts the right of a physician to practice within the physician's scope of practice is void." "Physician" includes anyone authorized under the Arkansas Medical Practices Act (§§ 17-95-201 et seq., 17-95-301 et seq., 17-95-401 et seq.) and osteopaths (§ 17-91-101 et seq.). Non-solicits, confidentiality, and patient-list protections remain available.

VI. Reformation Under § 4-75-101(f)

For statutory covenants, the court shall reform overbroad restrictions to make them reasonable and shall enforce the agreement as reformed. This is more than blue-pencil; the court actively rewrites the offending terms to the minimum necessary scope. Drafting can be ambitious within reason, but oppressive overreach risks judicial scrutiny on consideration/protectable-interest grounds.

VII. Federal Overlay

FTC Non-Compete Rule, 16 C.F.R. Part 910 — verify current status before relying.

VIII. Recommendation

☐ Execute as drafted
☐ Modify before execution: [________________________________]
☐ Do not execute (physician under Act 232 / common-law overbroad)

Part B — Non-Compete Agreement

EMPLOYEE NON-COMPETITION AGREEMENT
(Governed by Arkansas Law — Ark. Code Ann. § 4-75-101)

This Agreement is entered into as of [__/__/____] between [EMPLOYER LEGAL NAME], a [STATE] [ENTITY TYPE] with its principal place of business at [________________________________] ("Company"), and [EMPLOYEE NAME] residing at [________________________________] ("Employee").

1. Statutory Representation

Employee represents that Employee is NOT a "physician" within the meaning of Ark. Code Ann. § 4-75-101(k) (i.e., not authorized under the Arkansas Medical Practices Act or as an osteopath). If this representation is incorrect, Sections 3–5 are void by operation of statute, but Sections 6–8 (non-solicitation and confidentiality) remain in effect.

2. Consideration

In exchange for Employee's covenants, Company provides: ☐ Initial offer of employment ☐ Continued employment (sufficient per § 4-75-101(g)) ☐ Sign-on bonus of $[_____] ☐ Promotion ☐ Equity ☐ Access to Confidential Information. Employee acknowledges this consideration is bargained-for and supports each restriction.

3. Definitions

4. Protectable Business Interests

Employee acknowledges Company has invested in and Company protects the following interests under § 4-75-101(b): ☐ Trade secrets ☐ Customer lists ☐ Goodwill with customers ☐ Pricing/cost data ☐ Methods ☐ Training ☐ Confidential information ☐ Other: [_____].

5. Non-Competition Covenant

During the Restricted Period and within the Restricted Territory, Employee shall not engage in the Restricted Business in a capacity substantially similar to Employee's role with Company.

6. Customer Non-Solicitation

During the Restricted Period, Employee shall not solicit or accept business from any Customer for the purpose of providing competing products or services.

7. Employee Non-Solicitation

During the Restricted Period, Employee shall not solicit, recruit, or hire any then-current Company employee with whom Employee worked in the final 12 months.

8. Confidentiality

Employee shall hold Confidential Information in trust and shall not use or disclose it except for Company's benefit. Trade-secret protections survive indefinitely under the Arkansas Trade Secrets Act.

9. Mandatory Reformation Clause

The parties acknowledge that if any restriction is found unreasonable under § 4-75-101(a)(1) or (2), the court is required by § 4-75-101(f) to reform the covenant to a reasonable scope and enforce it as reformed. The parties intend this Agreement to be reformed (not voided) to the minimum necessary extent.

10. Remedies

Employee acknowledges that breach causes irreparable harm, which the parties stipulate per § 4-75-101(e)(2). Company is entitled to seek temporary, preliminary, and permanent injunctive relief, in addition to damages and attorneys' fees as permitted by law.

11. Governing Law and Venue

This Agreement is governed by Arkansas law. Exclusive venue lies in [______] County Circuit Court, Arkansas, or the U.S. District Court for the [Eastern/Western] District of Arkansas.

12. Severability, Survival, Integration

Unenforceable provisions are severable. Sections 5–10 survive termination.

SIGNATURES

Part C — Pre-Signing Checklist

☐ Confirmed Employee is NOT a physician under § 4-75-101(k) (Act 232 of 2025); if Employee is a physician, do NOT include non-compete — use non-solicit + confidentiality only
☐ Confirmed Employee is not other Title 17 Subtitle 3 healthcare professional with public-interest exposure (Bicak, Jaraki, Duffner)
☐ Agreement dated on or after July 22, 2015 (statute applies)
☐ Protectable interest identified from § 4-75-101(b) list
☐ Duration ≤ 24 months (statutory presumption of reasonableness)
☐ Geography tied to actual operations / customer territory
☐ Scope narrowly defined to competing activity
☐ Consideration documented (continued employment is sufficient but additional consideration strengthens record)
☐ Reformation clause references § 4-75-101(f)
☐ Companion non-solicit and confidentiality agreements in place
☐ Arkansas Trade Secrets Act compliance verified
☐ FTC Non-Compete Rule status verified as of execution
☐ Employee given reasonable opportunity to consult counsel
☐ Choice of law: Arkansas; venue: Arkansas
☐ Signed copies retained in personnel file

Sources and References

• Ark. Code Ann. § 4-75-101 — https://codes.findlaw.com/ar/title-4-business-and-commercial-law/ar-code-sect-4-75-101/
• Act 232 of 2025 (physician non-compete ban) — Littler Analysis: https://www.littler.com/news-analysis/asap/arkansas-bans-physician-non-compete-agreements
• Statco Wireless, LLC v. Sw. Bell Wireless, LLC, 80 Ark. App. 284, 95 S.W.3d 13 (2003)
• Mercy Health Sys. of Nw. Ark., Inc. v. Bicak, 2011 Ark. App. 341, 383 S.W.3d 869
• Jaraki v. Cardiology Assocs. of NE Ark., P.A., 75 Ark. App. 198, 55 S.W.3d 799 (2001)
• Duffner v. Alberty, 19 Ark. App. 137, 718 S.W.2d 111 (1986)
• Arkansas Trade Secrets Act — Ark. Code Ann. § 4-75-601 et seq.
• FTC Non-Compete Rule, 16 C.F.R. Part 910