Deciphering the Fine Print: A Guide to Non-Compete Agreements for Employers and Employees
Updated: May 20
In the modern business landscape, the protection of proprietary information, trade secrets, and customer relations is essential. To safeguard these crucial assets, many employers in Florida, as in other states, often use restrictive covenants, such as non-compete agreements, as a defensive measure. Unlike most states, which view restrictive covenants with skepticism, Florida public policy favors enforcement of reasonable restrictive covenants not to compete. GFA International, Inc. v. Trillas, 327 So.2d 872 (Fla. 3d 2021). Therefore, it is important for employers and employees to understand the legal landscape that informs the interpretation and enforcement of these agreements. This article will delve into the intricacies of these covenants, their enforceability under Florida law, and the implications for both employers and employees.
Understanding Restrictive Covenants and Non-Compete Agreements
A restrictive covenant is a clause in an employment contract that imposes certain restrictions on an employee's activities during and after the period of employment. Among the most common forms of restrictive covenants is the non-compete agreement, which seeks to limit an employee's ability to work for a competitor or start a competing business within a certain geographical area and for a specified period after leaving the employer. Under Florida law, restrictive covenants are valid if the employer can prove (1) the existence of one or more legitimate business interests justifying the restrictive covenant, and (2) that the contractually specified restraint is reasonably necessary to protect those interests. 7-Eleven, Inc. v. Kapoor Bros. Inc., 977 F. Supp. 2d 1211 (M.D. Fla. 2013) (applying Florida law); Autonation, Inc. v. O'Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004) (applying Florida law).
Enforceability of Non-Compete Agreements in Florida
Florida law, specifically Section 542.335 of the Florida Statutes, governs the enforceability of non-compete agreements. Contrary to some jurisdictions where non-compete agreements are viewed with skepticism, Florida generally enforces these agreements provided they are reasonable in time, area, and line of business, and are necessary to protect a legitimate business interest.
Legitimate business interests, as defined by Florida law, include trade secrets, valuable confidential business or professional information, substantial relationships with specific prospective or existing customers, clients, or patients, customer goodwill associated with an ongoing business, and specialized training. Dyer v. Pioneer Concepts, Inc., 667 So.2d (Fla. 2d DCA 1996). Even training may give rise to the right to restrict a former employee if the training is classified as extraordinary. Id. The Usual remedy for breach of agreement not to compete is injunction, as damages are difficult to prove. Environmental Services, Inc. v. Carter, 9 So.3d 1258 (Fla. 5th DCA 2009).
The burden is on the employer to prove the existence of one or more legitimate business interests justifying the non-compete agreement. If this is established, the burden then shifts to the employee to demonstrate that the contractually specified restraint is overbroad, overlong, or otherwise not necessary to protect the established legitimate business interest. When preparing these agreements, it is important to remember that the courts will strictly interpret the agreement as written. RX Solutions, Inc. v. Express Pharmacy Services, Inc., 746 So.2d 475 (Fla. 2d DCA 1999). However, in the event that a term is lacking or is overbroad in an otherwise enforceable agreement not to compete, the offending language may be judicially modified to include a reasonable scope. See Santana Products, Co. v. Von Korf, 573 So.2d 1027 (Fla. 2d DCA 1991) (modifying an agreement to include reasonable geographical limitations).
Implications for Employers and Employees
For employers, non-compete agreements are useful tools for protecting valuable business interests. They can prevent former employees from leveraging proprietary information or customer relationships to compete unfairly with the former employer. However, employers must ensure that these agreements are reasonable and necessary to protect a legitimate business interest.
For employees, it's essential to understand the implications of signing a non-compete agreement. Such an agreement can limit job mobility and opportunities after leaving an employer. Employees asked to sign a non-compete agreement should carefully consider its terms and may want to seek legal advice to ensure the agreement is fair and reasonable. The law allows the employer and employee to enter into these agreements even after the employment has commenced, Open Magnetic Imaging, Inc. v. Nieves-Garcia, 826 So.2d 415 (Fla. 3d DCA 2002), but the best practice is to have employees review and sign these agreements before the employment commences.
Companies seeking to enjoin activity of former employers in relation to clients must show that the former employee induced customers to break contracts, solicited their business, that there was a special financial or trust relationship between the parties, or that there was a unique or special relationship between the company and its customers. Barberio-Powell v. Bernstein Liebstone Associates, Inc., 624 So.2d 383 (Fla. 4th DCA 1993). In the absence of such a special relationship between the former employer and customer, restrictive agreements that prohibit solicitation of customers, will typically not preclude a former employee from servicing customers who voluntarily followed employee to the new employment. Kephart v. Hair Returns, Inc., 685 So.2d 959 (Fla. 4th DCA 1996). Nevertheless, it is always a good idea to have a noncompete agreement in place if an employer wants to protect its customer list. One court, for example, has ruled that the name of an association’s patients were not protected trade secrets absent a noncompete agreement. Alan Scott, D.C., P.A. v. Greg F. Moses, D.C., 712 So.2d 1242 (Fla. 4th DCA 1998). One final point of consideration is that the courts may properly consider an employer’s breach of contract when deciding on the enforceability of a restrictive agreement not to compete. Northern Trust Investments, N.A. v. Domino,896 So. 2d 880, 881–82 (Fla. 4th DCA 2005). The rationale behind this is that a party seeking to enforce a contract must have performed its obligation under the same agreement.
Non-compete agreements can be a powerful tool for businesses seeking to protect their legitimate interests. However, the enforceability of these agreements in Florida depends on several factors, including reasonableness and necessity. Both employers and employees should understand the implications of these agreements and may wish to seek legal counsel to navigate this complex area of law. As with any legal issue, the specifics of each situation can significantly impact the outcome, so individualized advice is critical. The legal experts at VAdam Law can provide personalized advice based on specific circumstances, ensure compliance with requirements, and help maximize the benefits of non-compete agreements.
To learn more about VAdam Law and schedule a free consultation, visit our online scheduling portal or call 24 hours a day at (954) 451-0792.