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Employee Non-Compete Agreements

UntitledTo protect their business and goodwill, employers often require employees to sign non-compete agreements. While the motivation behind this type of contract may seem reasonable, the terms of a non-compete agreement can be overreaching and may infringe on the employee’s right to earn a living once the employer-employee relationship comes to an end. This is one of the reasons why courts carefully scrutinize these contracts when they are at the center of a legal dispute.

Basic elements

To be held valid, a non-competition agreement must, upon signature: (a) be supported by consideration; (b) protect a legitimate employer interest; (c) be reasonable in time, area, and line of business. Under Florida law, employment covenants that restrict competition during or after their term must be in writing and signed by the employee.

Consideration means that the employee must receive something from the employer in exchange for promising that he or she will not compete. In some states, an offer of employment is sufficient consideration if the non-compete is signed at the time of employment. Also, if the employee is asked to sign the agreement during the course of employment, he or she must do so in exchange for something else, such as a promotion or bonus in addition to what was promised at the beginning of employment. Not so in Florida. As an “employment-at-will state,” Florida courts have consistently enforced non-compete agreements where the consideration for the non-compete agreement is continued employment. For example, in the 2002 case of Open Magnetic Imaging, Inc. v. Nieves-Garcia, the court held that a non-compete agreement signed by an employee five months after starting employment was enforceable, even though it broadened the geographic scope of the competition restraint. The consideration was the employee’s ability to keep their job upon signature.

A legitimate business interest may include protecting the employer’s customer or supplier-base, preventing employees from going to work for the competition (or inciting their co-workers to do so), and keeping employees from starting a competing business, especially using the company’s intellectual property, customers, and employees to do so.

Florida law explicitly recognizes the following as non-exclusive legitimate business interests:

1. Trade secrets, as defined under Florida statutes, section 688.002(4)

2. Valuable confidential business or professional information that otherwise does not qualify as trade secrets.

3. Substantial relationships with specific prospective or existing customers, patients, or clients.

4. Customer, patient, or client goodwill associated with:

a. An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress”;

b. A specific geographic location; or

c. A specific marketing or trade area.

5. Extraordinary or specialized training.

To determine whether a non-compete agreement is reasonable in in time, area, and line of business, courts look at the law and the facts of each individual case. Typically, an agreement that is very broad will be held invalid. For example, a non-compete agreement will likely be held invalid if it requires an employee to refrain from working in a geographic location where the employer does not do business. It will also be held invalid if the restraint is for an unreasonable time or the scope is beyond the employer’s industry or market segment. In Florida, any employment restraint 6 months or less in duration is presumed reasonable, and any restraint more than 2 years in duration is presumed unreasonable. For general contracts predicated on the protection of trade secrets, the timeframe increases.

Further, non-compete agreements that violate public policy will not be upheld. For example, some professions will automatically hold non-compete agreements that protect a client-base invalid. For instance, in the legal profession, a law firm may not require an attorney employee to refrain from “taking” his or her law firm clients upon departure from the firm due to the privilege afforded to the relationship between an attorney and his or her client.

Similarly, in the medical profession, the American Medical Association has openly expressed its opposition to non-compete agreements because of their effect in restricting competition, disrupting continuity of care, and potentially depriving the public of medical services. However, these agreements are still required from doctors. Nevertheless, courts have invalidated them, for example, because a patient’s right to receive continued care from his physician outweighed a medical center’s business interest, or when medical patients are forced to travel excessive distances to receive care (i.e., the patients reside in a market segment far away from the employer.)

Remedies

Florida law provides for any “appropriate and effective remedy,” for violations of a non-compete agreement including, but not limited to, temporary and permanent injunctions. A violation creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant. Remedies may also include attorney’s fees and costs to the prevailing party.

Best Practices

Due to the complexity of issues involved in employment non-compete agreements, it is in the employer’s and the employee’s best interest to engage the assistance of an attorney in an employment non-compete agreement matter, whether it involves drafting a valid agreement, reviewing it, negotiating it, enforcing it, or assisting with a contract breach scenario.

Whether you are an employer or employee, the Orlando employment law attorneys of Burruezo & Burruezo can assist you in assessing a non-compete agreement situation and offer competent legal representation, if necessary. Click here to contact an attorney now.

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