The inclusion of non-compete clauses in employment contracts is on the rise. Many business owners include this clause in various work agreements, whether between executives, employees, freelancers, or contractors. The elements and enforceability of non-compete contracts are often misunderstood, and vague language or language that does not conform to the statute’s requirements can prevent it from holding up in court. Here is what business owners should know about non-compete contracts.
A non-compete agreement is a contract where employees agree not to work for a competitor or start a rivaling business after their employment ends. The clause prevents employees of one organization from using confidential and proprietary information to establish a competing company. It also prevents employees from soliciting clients, customers, or patients from the former employer.
A non-compete agreement aims to protect a business owner’s interest and assets in their business. It prevents employees from taking advantage of their training and knowledge and using it against the former employer by starting a competing establishment. It also prevents employees from sharing confidential information about their former employer.
Florida is one of the few states where non-compete contracts are enforceable. Florida Statute 542.18 makes all contracts in restraint of trade unenforceable. Section 542.335 provides specific requirements to make a non-compete contract enforceable. All non-compete contracts must be in writing and signed by the employee to be enforceable. As discussed below, there are a few other elements every non-compete contract needs to be legally binding.
Legitimate Business Interest
The contract must be designed to protect a specific and legitimate business interest. By itself, simply telling an employee that he or she cannot work for a competitor will not be sufficient.
The contract needs to distinguish an amount of time the agreement should remain in effect after employment ends. This timeframe should be “reasonable,” as determined by the Florida courts. Anything less than six months will be deemed reasonable and anything over two years will be presumed to be unreasonable.
The non-compete agreement should specify the location that the clause is enforceable, acknowledging where the business currently resides and where they expect to do business in the future. For instance, it would be considered unreasonable to restrict an employee of a Florida-based business from starting a similar business in another state.
Line of business
Non-compete contracts should specify what activities the former employee cannot perform. It is important to be specific in this area, as vague language or broad associations will likely not be enforceable. For instance, it would be unreasonable to prevent a restaurant manager from seeking other employment in the food industry as part of a non-compete contract.
Business owners must prove there is considerable business interest in the competing business to file an injunction against a former employee. The three most common ways someone could breach a non-compete contract include:
- Soliciting clients, patients, or customers from a former employer
- Working for a rival company
- Starting a competing business
The business must prove their considerable business interest in the employee’s new workplace, such as:
- Sharing trade secrets
- Revealing confidential information
- The presence of specialized training
- Relationships with customers, patients, or clients
If you suspect a former employee violated your non-compete agreement, speak with a business attorney to file an injunction. The injunction will require the employee to stop the conflicting business activities.
Non-compete agreements are becoming a common feature of many business contracts. But the statute is both complicated and very specific. You should seek the assistance of an attorney whether you are developing a non-compete clause as part of your employment contract or believe a former employee has breached your non-compete agreement, In either event, Peppler Law, P.A. can help. Call us at 407-278-6073 to schedule a free consultation, or visit our office in Oviedo, FL.