Noncompete agreements and nonsolicitation agreements can be used by an employer to limit activities of an employee after their relationship has ended. Such agreements are often entered into freely when an employee accepts the position with the company. However, there is a growing trend in the U.S. to restrain use of noncompete and nonsolicitation agreements, especially those that are broadly drawn. In Florida, these agreements are legal only if they comply with certain statutory limitations.
A noncompete agreement is a contractual duty on an employee not to compete with the employer for a specified period of time and within a defined geographic area after they leave the company. These agreements are often utilized to prevent former employees from working for or starting a competing business in the same industry or location, which could potentially harm the original employer.
A nonsolicitation agreement prohibits a former employee from directly or indirectly approaching clients, customers or employees of the business for a certain period after the termination of their employment. This type of agreement is meant to shield a company’s key employees and business contacts, which are a major part of its basis of profitability.
Noncompete and nonsolicitation agreements are governed by Florida Statutes 542.335. The statute requires that an agreement be supported by a legitimate business interest. This may include trade secrets, valuable confidential information, substantial relationships with specific customers and specialized training provided to employees. An agreement that imposes restrictions greater than reasonably necessary to protect such interests may be declared void and unenforceable.
The following are some best practices for drafting a noncompete or nonsolicitation agreement that can withstand scrutiny under Florida law:
- Limit the agreement to select employees — The agreement should only be required of executives, managers or employees who have access to sensitive customer information and/or any other specialized or confidential information that could harm the employer if divulged. An agreement that includes administrative or lower-wage workers will be considered overbroad.
- Use narrow and reasonable restrictions — The agreement’s restrictions should be set at the minimum necessary to protect the company. Also, the restrictions should be tailored to the applicable employees and their particular circumstances.
- Provide consideration — Any contract needs to have valid consideration; that is, a thing of value exchanged for the promise being made. The initial offer of a job can be valid consideration for a noncompete or nonsolicitation agreement. But if you require an employee to sign an agreement later on, you must provide an added benefit in return, such as a bonus, promotion or stock option.
Florida companies wishing to make effective use of noncompete and nonsolicitation agreements should work with business attorneys who have a thorough understanding of the legal requirements and are experienced in drafting agreements that the courts will uphold.
H. Clay Parker, Esq. in Orlando advises Central Florida businesses on formation and enforcement of restrictive covenants of all kinds. Please call 407-216-2504 or contact us online to schedule an appointment.
