Employers sometimes ask their employees to sign non-compete agreements which limit the employees from competing against the employer after their employment ends. These agreements are sometimes referred to as “covenants not to compete.” In other words, if a person is employed and has signed a non-compete agreement, when their employement ends, their employer could try to prevent the former employee from continuing to work in the same business or industry. Lawyers are often asked if these types of agreements are enforceable in Florida.
Agreements such as this are considered to be in restaint of trade or commerce. Under common law, such restrictions were no looked on favorably for numerous reasons. In some ways, these kinds of restrictive agreements can “handcuff” an employee from making a living.
Florida has a specific statute which addresses agreements which are in restraint of trade or commerce. Section 542.335, Fla. Stat. provides that these types of restrictive provisons are enforceable under certain conditions.
First of all, the agreement must be in writing and must be signed by the employee. Merely givng notice to an employee that they cannot compete is not enough. The agreement must be in writing and it must be signed by the employee. A verbal agreement will not be enforceable in this scenario.
Secondly, the non-compete restriction must protect one or more legitimate business interests justifying the restrictive covenant. The term “legitimate business interest” includes, but is not limited to:
a. Trade secrets.
b. Valuable confidential business or professional information that otherwise does not qualify as trade secrets.
c. Substantial relationships with specific prospective or existing customers, patients, or clients.
d. Customer, patient, or client goodwill.
In addition, the restrictive covenant must be limited to a reasonable duration of time. Section 542.335 provides that a court shall presume reasonable in time any restraint which is 6 months or less in duration and shall presume unreasonable in time any restraint more than 2 years in duration. So, if an employer has the employee sign an agreement limiting competition for five years after employment ends, that will be presumed unreasonable.
It should be noted that the reasonableness of duration will likely be longer when the restriction is in connection with the sale of a business. So if the employee who is being limited from competing was the owner of a business which was sold, the duration could be more than if there was no business sale involved.
When the non-compete agreement is not in writing or is not to protect a legitimate business interest, then it is considered unlawful and void. If a contractually specified restraint is overbroad, overlong, or otherwise not reasonably necessary to protect the legitimate business interest or interests, a court shall modify the restraint and grant only the relief reasonably necessary to protect such interests. So for example, if an agreement has an unreasonable duration of four years, the court could reduce the duration to a reasonable one–such as two years–and still enforce the restrictive agreement.
The enforcability of non-compete agreements is a complex issue of law and fact. An employee should seek experienced legal counsel when faced with a request to enter into such an agreement. Likewise, an employer should seek counsel before initiating action to enforce such an agreement.