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Protecting Business Interests: The Non-Compete Agreement

It is the rare business that experiences overnight success – months and years of trial and error, brainstorming of ideas, and financial gains and losses are only some of the hard work put into a business as it establishes an identity. As the business expands, more and more employees typically are brought in and exposed to the inner workings of the business. How, then, can a business protect itself when those employees no longer work for the business? One common way that a business can safeguard its interests is through the use of a non-compete agreement.

Protecting Business Interests

Non-compete agreements are contracts, most often between an employer and an employee, that require the employee to agree not to enter into competition with the employer upon termination of employment. The purpose of this type of contract is to prevent an employee from working with a competitor of his former employer (or starting his or her own business) and then using the former employer’s business practices, trade secrets, client lists, marketing plans, etc. to gain a competitive edge. Although some states do not enforce non-compete agreements, Florida does allow these types of contracts, permitted they follow guidelines found in Florida Statute 542.335. These guidelines can be summarized below:

  • The non-compete agreement must be reasonable in its duration, geographical area, and line of business – A lifetime ban from entering into competition in any industry spanning every country simply is not reasonable and will not be enforced (in Florida or any other state). Agreements that are likely to be upheld in Florida are those that are limited in duration. Florida law presumes that a non-compete agreement sought to be enforced against an employee for longer than 2 years is presumptively unreasonable. Similarly, an agreement is more likely to be upheld by courts if the geographic limitation is narrowed to only those areas where the employer does business. Finally, a restriction on competing in a similar capacity in a competitor’s business is more likely to be upheld than a restriction that prohibits an employee for working for a competitor in any capacity.
  • The business interests sought to be protected by the agreement must be legitimate – Florida law provides a list citing several examples of business interests that it would consider legitimate. (Note: the list is not meant to be exhaustive.) Some of the interests likely to be acceptable in non-compete agreements include: trade secrets, valuable confidential information, substantial relationships with existing and potential customers/clients, and even specialized training.
  • The agreement must be reasonably necessary to protect those legitimate business interests – This final guideline essentially asserts that a non-compete agreement is more likely to be upheld if its existence is necessary to protect business interests. For example, not all employees of a business may need to be bound by these types of contracts. It would not be reasonably necessary for an employee in a corporation who is not exposed to trade secrets or customer lists, such as a janitor, to sign a non-compete. Similarly, if only a particular department or level of employees in a particular business received specialized training, it would be unreasonable to enforce a non-compete to protect that specialized training on every other employee in that business.

Also Read:

The attorneys at the Law Firm of Peter M. Feaman, P.A., are experienced in reviewing non-compete agreements for a variety of businesses. We provide service tailored to each of our client’s individual needs and have the skills to handle your business disputes. If you need help with a legal issue related to a non-compete agreement, please contact us at (561)734-5552 to find out what our qualified attorneys can do for you.