In the State of Florida, non-compete clauses in agreements are fraught with legal issues. Add to that, many states have already or are considering provisions to limit (or even ban) the use of non-compete agreements. This is a trend that is likely to continue. Particularly when taking the latest Federal Trade Commission (FTC) rule, if enacted, into consideration. This article includes this very important discussion.
The use of non-compete clauses, also known as restrictive covenants, is a common practice in the business world. These clauses have been commonly used by employers to protect their interests and prevent employees from working with competitors.
In Florida, these clauses are subject to certain restrictions , and their enforceability is often challenged. This is why it is crucial to have an experienced business attorney advise you on the scope and content of non-compete provisions in your company’s employment and other contract. In this post, we examine possible new FTC rules, the enforceability of non-compete clauses in the Sunshine State, and discuss the potential implications for individuals and businesses under current law.
What (May Be) New with Non-Compete Clauses
On January 5, 2023, the Federal Trade Commission (FTC) made a groundbreaking announcement that could have far-reaching implications for businesses across the country. At issue is the proposed rule that would essentially amount to a near-total ban on non-compete agreements between employers and employees. The move comes as part of a broader effort by the FTC to promote competition in various industries and break down barriers to job mobility.
The proposed rule would prohibit companies from enforcing non-compete agreements against their employees, eliminating what has become a common practice in many sectors of the economy. Non-competes are typically used to prevent workers from leaving their current employer and taking a job with a competitor or starting their own business in the same industry in competition with their former employer.
Proponents of the continued use of non-compete provisions argue that they are necessary to protect propritary information, trade secrets, and intellectual property, while opponents of these provisions who are in support of a ban contend that they stifle innovation and limit worker freedom.
Don’t panic if you use non-competes in your business. The majority of commenters agree that it is unlikely that the proposed rule will be implemented in its current form, if at all. However, employers who have historically relied on non-compete clauses should take note of the FTC’s initiative and understand that the law on restrictive covenants will continue to evolve.
What Does a Non-Compete Clause Entail?
A non-compete provision is typically included in an agreement between an employee and their employer, most commonly an employment agreement. The central feature of this provision is the obligation that an employee will refrain from directly or indirectly competing with their employer’s organization for a predetermined amount of time after leaving their employment. The term “Competition” can include going to work for a competitor, soliciting the former’s employer’s clients or employees, or using propritary information obtained from the former employer in a subsequent job.
Florida Non-Compete Provisions: Can Companies Enforce Them?
Jurisprudence addressing non-compete provisions center on the concept that after an employee has been employed, trained, and paid for by your company, they shouldn’t be allowed to harm it by utilizing your trade secrets or confidential information to compete against you or take your clients or employees.
Employers are generally permitted to restrict its employees under a non-compete provision from
- Working at a business that directly competes with their former employer.
- Soliciting your company’s vendors or employees to do business with a new employer.
- Soliciting your company’s clients or prospective clients to do business with a new employer.
- Disclosing or using private, proprietary, or confidential information obtained in the course of employment with your business .
Typically, Florida courts will enforce a non-compete provision restricting a former employee from taking these actions so long as the provision is reasonable in time and scope. In a litigation dispute over a non-compete provision, the business will need to explain why it needs to restrict the employee’s post-employment activities.
What Voids a Non-Compete Agreement?
First, a non-compete agreement must identify at least one legitimate business interest that you seek to protect; it won’t be enforceable if a court finds that there is no legitimate interest sought to be protected. The Florida Statutes, Section 542.335, currently provides a list of five categories of “legitimate business interests” that can be the subject of an enforceable restrictive covenant provision:
- Trade secrets
- Valuable confidential company information
- Relationships with prospective or current clients
- Customer goodwill
- Specialized training
Duration & Scope
Additionally, the restrictions must be reasonable in terms of their duration and geographic scope. Florida lacks a clear-cut standard for what constitutes a “reasonable” period of time. The restriction on an employee’s ability to work within a certain area or for a certain period should be narrowly tailored to protect the employer’s legitimate business interests. If the restriction is overly broad or unreasonable, it may be deemed unenforceable. A non-compete agreement also cannot prohibit an employee from engaging in any type of employment that is not related to the employer’s company interests.
Courts have established that continued employment alone is not adequate consideration for a non-compete agreement. This means that an employer cannot require an employee to sign a non-compete agreement as a condition of employment without offering them something additional in exchange. The value exchanged must be reasonable and fair under the circumstances.
Common forms of consideration in Florida include:
- Monetary compensation
- Specialized training
- Access to confidential information or trade secrets
- Bonuses, stock options, etc.
Enforcing Non-Compete Clauses
If you’re a business owner or employer looking to enforce a non-compete clause in Florida, it’s important to understand the legal framework governing these agreements.
You must specify in writing the duration and geographic scope of the restriction, as well as identify legitimate business interests that justify its use. It’s also crucial that both you and your employee fully understand and agree to the terms of the agreement before signing it.
Once you have verified that your non-compete agreement is valid and enforceable under Florida law, you should take steps to monitor employee compliance with its provisions.
If an issue does arise, your business attorney can send a cease-and-desist letter to a former employee who violates the restrictive covenants. A cease-and-desist letter should clearly outline the details of the violation and demand that they immediately stop. Sometimes, a new employer will ensure steps are taken to comply with a valid non-compete restriction to avoid the time and expense of costly litigation. Savvy business owners with good business counsel will typically inquire with prospective hires if they are subject to non-compete or other restrictive covenants before hiring to best position the new employer company to address any legal issues with the non-compete.
Safeguarding Your Non-Compete Rights
Your business can benefit greatly from non-compete provisions to protect your company’s legitimate business interests, but if they are not compliant with Florida law, a former employee may find a way to avoid being bound and any non-compete will be worthless.
Read More > How Do I Protect My Business with a Non-Compete?
Contact the Frazer Firm
Because of the complexity of Florida’s non-compete laws, and expected changes in the legal landscape in the near future, it is imperative to consult with an business attorney that is experienced with drafting, negotiating, and litigating non-compete provisions and restrictive convenants. We are aware of the changing rules and can assist you in drafting a strong and enforceable non-compete agreements and help your company enforce its business interests in court if a former employee violates their agreement with you. We also assist companies who hire employees subject to non-compete provisions defend against enforcement actions in court.
Contact the experienced business lawyers at The Frazer Firm in Jupiter, Florida today for additional details on your non-compete issue.
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