Non-Compete Agreements in Florida

Has a potential employer asked you to sign a non-compete agreement as a condition of employment or has your current employer asked you to sign one because you have been offered a promotion within the company? Maybe you signed one when you accepted your current position and you now wish to resign that position, but you are concerned about how the non-compete agreement will impact your ability to accept a new job after you resign. In all of these scenarios, it is imperative to understand what a non-compete agreement is, whether it is enforceable in the State of Florida, and what are the consequences if it is enforced.

What Is a Non-Compete Agreement?   

A non-compete agreement, also referred to as a “covenant not to compete,” a “non-competition clause” or a “restrictive covenant,” is a contract between an employer and an employee in which the employee agrees not to enter into competition with the employer during and/or after employment.  It is easy to see why an employer might feel the need for a non-compete agreement under certain circumstances. From an employer’s perspective, the employer wants to prevent an employee from going to work for a competitor or starting a competing business, and making use of trade secrets, customer lists, business practices or other sensitive information obtained while employed by the employer. For example, assume you work for a software company selling one of its products. As a sales representative, your employer has spent time and resources training you on how its product works, has introduced you to its customers and paid you to develop relationships with these customers, and has provided you with information regarding the pricing of its product which, in many instances, is not public information.  Without a non-compete agreement in place, there is very little stopping you from resigning from your current employer and taking a similar position with a competitor who is promoting a new software product.  You would be able to solicit the same customers and tell them why your new employer’s product is better.  You would also be able to help your new employer price its product in a way that would undercut your old employer’s product. It is that very concern why the law allows employers in the State of Florida to use a non-compete agreement to protect its investments.

When Is a Non-Compete Agreement Enforceable in Florida?

Whether or not a non-compete agreement is enforceable is an issue that is governed by state contract and employment law. Section 542.335 of the Florida Statutes specifically addresses non-compete agreements and makes it clear that non-compete agreements are enforceable in this state. However, this statute requires that certain conditions be satisfied before a non-compete agreement can be enforced, including that the agreement must be in writing, signed by the employee, and the restrictions must further a “legitimate business interest.” A verbal non-compete agreement or a verbal amendment to an existing employment agreement is not enforceable. Moreover, the employee who the employer is trying to restrict has to actually sign the non-compete agreement. A general company policy that restricts subsequent employment opportunities is not enforceable unless the employee acknowledges the policy with a signature.  The employer also has to demonstrate that it has a legitimate business interest to protect, such as a trade secret, valuable confidential information, relationships with existing or prospective customers, or specialized training or employees.

Florida Statute Section 542.335 also addresses the type of information that can be protected, the reasonableness of time and geographic restrictions that can be included in a non-compete agreement, and the burdens of proof for the parties seeking to enforce or oppose a non-compete agreement.  The statute addresses in detail the different durations of time that are presumed to be reasonable based upon the type of person being restricted, i.e. whether you are an employee, a distributor, a person selling a business, etc. It is important to note that the time periods and other restrictions set forth in this statute are just presumptions that can be rebutted by the employee. This statute also gives courts the authority to modify the terms in a non-compete agreement to a point that is deemed reasonable, if the agreement includes unreasonable restrictions.

Non-compete agreements are also evaluated under general contract law and, as such, the employer must provide some “consideration” or benefit to the employee for entering into the agreement.  Florida courts have typically held that when an offer of employment is made contingent upon the prospective employee signing a non-compete agreement, the offer of employment is sufficient consideration to create a binding contract. Florida courts have even held that if an employee’s employment is terminable at will, non-compete agreements are still enforceable even if the agreement was required to be executed well after the commencement of the employment term as a condition for continued employment. Open Magnetic Imaging, Inc. v. Nieves-Garcia, 826 So.2d 415 (Fla. 3d DCA 2002); Criss v. Davis, Presser & LaFaye, 494 So.2d 525 (Fla. 1st DCA 2002); Tasty Box Lunch Co. v. Kennedy, 121 So.2d 52 (Fla. 3d DCA 1960).

What Is the Remedy for Violating a Non-Compete Agreement?

What happens if an employee violates the terms of a non-compete agreement? After all, the agreement is only valuable if there is an incentive for the former employee to honor the agreement after his or her employment terminates. Injunctive relief is usually the remedy of choice for a violation of a non-compete agreement. For example, if you resigned your position at the software company and immediately went to work for a competitor, in direct violation of the non-compete agreement, a court might order you to cease selling the similar products, stop selling to customers of your previous employer, or to stop working for the competitor altogether. Florida courts have also determined that employers are able to recover monetary damages against an employee for breach of a non-compete agreement.  These damages may include lost profits of the employer, disgorgement of any profits earned by the former employee or his or her new employer during the time the non-compete agreement was being violated, punitive damages to punish the employee for his or her breach, and an award of the employer’s attorney’s fees spent in enforcing the non-compete agreement.

Recommendations

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