A non-compete clause is a contractual agreement that an employee will not compete with the employer’s business during employment or will not work in or start up a competing business for a fixed period of time after leaving the employer. A non-compete agreement can place geographic restrictions on where a former employee can work and it can also prohibit working in a certain field.
Non-compete clauses are legal in Florida, but a state statute places strict limits on their use so that they do not become illegal restraints of trade or commerce. The following are five ways a non-compete agreement can fail the test of enforceability:
- The employment contract has been breached — A non-compete clause is enforceable only if the employment contract that contains it is valid. The contract must be in writing and signed by the employee who will be subject to the restrictions. Furthermore, if the employer does not honor the contract, the employee is not bound by the non-compete.
- The non-compete is not related to a legitimate business interest — A Florida employer must prove that the non-compete seeks to further protection of one of more of these business interests:
- Trade secrets (e.g., a formula, technique, or program that is not generally known to the public)
- Confidential or valuable business information that is not considered a trade secret (e.g., lists of customers)
- Important relationships with existing or potential customers, clients or patients
- The goodwill of a business (e.g., the intangible value of a brand’s identity)
- Extraordinary training (e.g., specialized coaching, education or instruction)
- The non-compete negatively impacts the employee’s ability to find new work —Although a court does not have to consider the economic hardship that a non-compete may cause, recent Florida cases have seen the courts balance the business interests of the employer with the former employee’s right to work, which is protected by the Florida Constitution.
- The non-compete is too long in duration — By statute, non-competes are presumed reasonable when the duration is six months or less and unreasonable when they extend for two years or more. For agreements that protect trade secrets, five years or less is presumed a reasonable limit and 10 years or more is presumptively reasonable.
- The non-compete covers too wide an area — An agreement with geographical restrictions is generally not enforceable beyond the area in which the employer does business. If the employer no longer has a presence in a particular location, the non-compete cannot be enforced there.
Before you draft or sign a non-compete agreement, consult with a central Florida noncompete agreement lawyer for guidance on its enforceability.
Clay Parker, Esq. advises Central Florida clients on a full range of contract matters, including non-competition agreements and employment contracts. Please call 407-216-2504 or contact us online to schedule an appointment at our Orlando office. In cases related to civil or business litigation, we offer a $50 initial consultation.