Are Noncompete Clauses Now Legal in Florida Employment Contracts?

Noncompete clauses in employment contracts balance the interests of employers in protecting their business assets with the rights of employees to seek new employment opportunities. Florida law has found noncompetes to be enforceable as long as they are reasonable in scope, duration and geographic range. However, the legal viability of these agreements has been put in jeopardy by recent federal developments.

In 2023, the Federal Trade Commission (FTC) issued a rule banning noncompete clauses on the grounds that they limit workers’ job mobility. The prohibition was intended to promote competition, business startups and job creation. However, a recent decision by a federal judge in Texas has effectively struck down the FTC's ban. The court ruled that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition, which are traditionally governed by state law.

The federal court's decision has significant implications for the enforceability of noncompete clauses in Florida. Since the FTC's ban has been nullified, Florida's existing legal framework governing noncompete agreements remains intact. Employers in Florida can continue to include noncompete clauses in their employment contracts, provided they comply with state law requirements.

Florida Statutes Section 542.335 permits the enforcement of restrictive covenants like noncompete agreements, but with several conditions. A clause must be reasonable in terms of time, area and line of business. Typically, a noncompete lasting up to two years is presumed reasonable, though courts may approve longer durations depending on the circumstances.

Additionally, the employer must demonstrate a legitimate business interest that justifies the restriction. Such interests may include trade secrets, confidential business information, substantial relationships with specific customers, and specialized training provided to the employee.

Although the FTC's attempt to ban noncompete clauses has been halted, the federal case will likely be headed to the U.S. Supreme Court, which has recently revived a doctrine that affords deference to a federal agency’s interpretation of its own power.

For now, noncompete clauses in Florida employment contracts will likely be enforced if they are found to be reasonable and protective of legitimate business interests. However, the recent legal developments at the federal level may embolden challenges to these clauses. Employers and employees should carefully consider the terms of any such agreement before signing.

H. Clay Parker, Esq. in Orlando advises Central Florida clients on the formation, review and enforcement of noncompete agreements. Please call [ln::phone] or contact us online. In cases related to civil or business litigation, we offer a $50 initial consultation.