Enforcing Non-Compete Agreements
Employees are an important part of any business, and they are necessary to the company’s smooth operation. Businesses want to attract the best and the brightest, knowing that they will reap the rewards of employing competent people. However, this presents them with a problem. How should a company handle an employee who wants to strike off on their own and form a competing company? Many businesses try to solve this problem using non-compete agreements, also known as restrictive covenants. Unfortunately, companies using these agreements often find judges reluctant to enforce them when they try to go to court.
The reason for this is that the courts are trying to balance competing interests. On the one hand, many companies have good reasons for having employees sign non-compete agreements. Training employees can be long and expensive, and many employees have access to sensitive data like client lists or other trade secrets.
On the other hand, non-compete agreements can be a powerful tool of coercion. Employees with overly-restrictive non-compete agreements often find themselves tied to one employer since they cannot get another job in the same field. Additionally, those agreements deprive consumers of future businesses that might compete with the original. In order to strike a balance between these interests, the Florida legislature issued Florida Statute 542.335, which lays out all of the qualifications that a non-compete agreement must meet, including valid reasons for the agreement and valid geographic and temporal restrictions.
Reasons to Use Non-Compete Agreements
The statute requires that business owners use non-compete agreements to protect “legitimate business interests.” While the statute does not define a legitimate business interest, it does provide a non-exhaustive list of examples:
- The protection of trade secrets;
- The protection of valuable confidential information that does not qualify for protection as a trade secret;
- Preventing former employees from taking advantage of “relationships with specific prospective or existing customers, patients, or clients;”
- The protection of client goodwill related to trademarks, geographic location, or trade areas; and
- The protection of an investment in the employee by way of “extraordinary or specialized training.”
Valid Geography and Time Restrictions
However, merely having a legitimate business interest is not enough. Companies must also ensure that the restrictions are not overbroad. Two of the most common ways that employees demonstrate the overbreadth of a non-compete agreement is through an excessive restriction on geography or on time before competition may begin.
The exact limitations that courts are willing to accept on geography are likely to vary based on the specifics of the case. The statute provides no guidance. However, a company’s restricting of “competition” in an area that they do not do business will likely be frowned upon.
Temporal limitations are more well-defined. The statute provides a set of times that are presumptively valid or invalid depending on what business interest the non-compete is protecting. For instance, non-competes based on the protection of trade secrets are presumptively valid if they last under five years and presumptively invalid if they last more than 10.
Non-compete agreements are a highly subjective area of the law, where strong advocacy can make a big difference. If you are attempting to enforce a non-compete agreement, contact a West Palm Beach business litigation attorney at Pike & Lustig, LLP today.
