Employees across the country enter non-compete agreements without appreciating the ways in which the agreements can limit their future work prospects. If your employer or ex-employer is seeking to enforce a non-compete agreement against you, contact an experienced attorney immediately.

WHAT IS A NON-COMPETE AGREEMENT

A non-compete agreement is a written contract whereby an employee agrees not to compete with its employer during or after the employee’s term of employment. The term “compete” is often broadly defined to include a former employee providing the same goods or services to the same customers served by his/her former employer, whether by working for a competitor, starting a new, competing company, or providing services in the employee’s individual capacity.

The rationale for enforcing non-compete agreements is that employers have a legitimate interest in protecting their significant investment in business relationships, which can take many forms, including the following: (i) time and resources dedicated to training employees, (ii) confidential information, strategies, and trade secrets, and (iii) certain relationships with customers, vendors, and employees.

Although non-compete agreements are seen across industries, they are typically used in industries with repeat clientele (i.e., investment managers, healthcare, sales and service professionals), in transactions involving the purchase and sale of a business, and where highly confidential information is involved.

COMPONENTS OF A NON-COMPETE AGREEMENT

In addition to an agreement not to compete with a former employer, non-compete agreements often also include the following: (i) an agreement not to solicit business from certain individuals (“non-solicitation”), and (ii) an agreement not to disclose the employer’s confidential information (“non-disclosure”).

Non-solicitation provisions typically prohibit an ex-employee from “soliciting” an employer’s employees, customers/clients, and vendors, but they sometimes encompass more than mere solicitation. For instance, many non-solicitation provisions prohibit employees from accepting business from particular customers, so a violation may occur even if there was no active attempt to persuade the customer to switch its business from your ex-employer. The contract language will control whether the non-solicitation provision prohibits more than standard “solicitation.”

Non-disclosure provisions typically prohibit employees from disclosing confidential information regarding the former employer, including trade secrets, customer information, business plans/strategies, and financial information.

ARE NON-COMPETE AGREEMENTS ENFORCEABLE

As is typically the case with most questions of contract enforceability, whether a court will uphold the express terms of a non-compete agreement depends on the specific contract language.

Florida Statute § 542.335 governs the enforceability of non-compete agreements and provides that such agreements must be made in writing and signed by the employee. Thus, oral non-compete agreements are not enforceable. Written non-compete agreements are enforceable, so long as they are reasonable in time, area, and line of business.”

· Time Restrictions: There is a rebuttable presumption that a former employee’s non-compete agreement is reasonable as to duration if it prohibits competition for six months or less, but that it is unreasonable as to duration if the restrictions last for two years or more.

· Area Restrictions: Non-compete agreements must define the territory in which the employee is restrained from doing business. For example, some agreements restrict competition within a certain distance of the employer’s office (i.e., within 25 miles of any of the employer’s offices in Florida). Typically, a non-compete agreement should not prevent the employee from working where the former employer does not operate.

· Line of Business: Non-compete agreements must specify the relevant line of business in which the ex-employee cannot compete.

If the non-compete agreement is reasonable with respect to duration, geography, and line of business, a Florida court will enforce the agreement. In fact, the Florida statutes expressly provide that “a court shall construe a restrictive covenant in favor of providing reasonable protection to all legitimate business interests.” As a result, even if the non-compete agreement is overly broad, Florida courts will seek to avoid striking the agreement altogether and, instead, will modify the agreement and provide for reasonable restrictions (a practice referred to as “Blue Penciling.”)

ENFORCEMENT MECHANISMS

Employers often seek to enforce non-compete agreements out of court by issuing strong demand letters that order employees to cease-and-desist from any impermissible competition. If the parties cannot reach agreement informally, however, employers may seek relief from the courts in the form of (i) injunctive relief (an order stopping the employee from violating the agreement), (ii) an action for monetary damages (to compensate the employer for lost profits), and (iii) a claim against the employee’s new employer for interfering with the enforcement of the non-compete agreement. In addition, the prevailing party in such lawsuits may be entitled to an award of its attorneys’ fees and costs, rendering defeat doubly expensive.

POTENTIAL DEFENSES TO ENFORCEMENT

Even if an employee has breached the express terms of a non-compete agreement, it may still have viable defenses to a lawsuit, including those below:

• The time, area, and line of business restrictions were unreasonable and overly broad.

• The employee received no consideration (i.e., nothing of value) for the promise not-to-compete.

• The employer has no legitimate business purpose for enforcing the agreement against a particular employee (i.e., the employee should not be barred from competing in Jacksonville if he worked for the employer only in Miami).

• Employer no longer engages in the business he seeks to prevent competition in.

• Employer first breached the employment contract.

• The agreement prohibits activities the former employee did not perform for the former employer.



CHANGING LANDSCAPE

The Federal Trade Commission is seeking to ban most non-compete agreements at the federal level. Specifically, on January 5, 2023, the FTC issued a Notice of Proposed Rulemaking that would prohibit Employers from (i) entering into new non-compete clauses, (ii) maintaining existing non-compete clauses, and (iii) representing to a worker that the worker is subject to a non-complete clause. This ban would not extend to non-solicitation and non-disclosure agreements, unless they are so broad that they essentially function as a non-compete agreement.

Public comment closed on the proposed rule on April 19, 2023 and, as of that date, the FTC had received over 26,000 comments from employers, employees, and other interested parties. The FTC is expected to vote on the proposed rule in the first or second quarter of 2024.

If you need help, contact the Law Offices of Moneyede Martin, P.A.! The firm’s managing attorney, Moneyede Martin, has experience with non-compete agreements, and he has served as a lecturer for the Florida Bar on such agreements. Do not go at it alone!