Non-Compete Agreements

Non-Solicitation

• A Non-Solicitation agreement forbids an employee from seeking customers from their former employer to join them in a new business. • These customers could not be "solicited" to join them. • There must also be a legitimate business interest here as well. • There must have been some direct contact normally between the employee and customers

Duration

• An employee NCA cannot be longer than TWO years from the date the employee leaves the company. • Even then, there must be some legitimate business interest to justify a 2 year NCA. • Any NCA less than 6 months is presumed to advance the legitimate business interest.

Other Rules

• Assignees are also allowed to enforce NCAs ONLY if the contract contains an assignment clause. • These are fairly standard, but it is crucial that it is included. • A NCA is unenforceable if the company no longer works in the "line of business" it originally did when the NCA was signed. • Interestingly, the normal rule for contracts is that any ambiguity is interpreted against the drafter of the contract. Other states specifically say the contract is construed in favor of the employee. Florida law specifically says those do not matter!!! The contract clauses are construed with no presumptions

The Agreement: what can an employer require of an employee?

• First, the employer can demand that the employee sign the agreement before hire or even while working. • The general rule is that consideration must be present on both sides to legalize such an agreement - what is the consideration here? • No additional consideration is needed - this can be a term and condition of the job. The employee's only recourse is to simply not work at that place, or quit their job. The agreement must be in WRITING.

Non-Competes

• Florida non-compete law is actually fairly employee-friendly. • Other states, like Louisiana and Texas are MUCH more employer-friendly. • The general rule: restraining someone from working is illegal. • However, if the non-compete agreement complies with the exception to that rule, it can and will be enforceable. Florida's Non-compete statute F.S.A. 542.335.

Legitimate Business Interests

• In order for a non-compete agreement to be valid, the employer must have a legitimate business interest for requiring one. • An employer can't simply demand a NCA simply because it wants to - there must be some good reason this particular company needs it. • Note that other states do NOT have this requirement! Some legitimate business interests are: • Protection of valuable business information • Substantial relationships with specific clients • Training expenses • If there is no legitimate business interest, then the non-compete is VOID!!! • It must be shown that the non-compete agreement is "reasonably necessary" to protect the business' interests.

Non-disclosure

• Non-disclosure agreements forbid the employee from divulging business information to anyone else, especially to the business' competitors. • The same rules in terms of reasonableness and duration apply to these two. Sometimes, the non-disclosure and non-solicitation agreements are more important than the non-compete agreements!

Non-solicitation/Non-disclosure Agreements

• Often, non-solicitation and non-disclosure agreements are part of an NCA • A Non-Solicitation agreement forbids an employee from seeking customers from their former employer to join them in a new business. • These customers could not be "solicited" to join them. • There must also be a legitimate business interest here as well. • There must have been some direct contact between the employee and customers. • Non-disclosure agreements forbid the employee from divulging business information to anyone else, especially to the business' competitors. • The same rules in terms of reasonableness and duration apply to these two. Sometimes, the non-disclosure and non-solicitation agreements are more important than the non-compete agreements!

Non-Compete Agreements (NCA)

• Prevents an employee from working for a competing business for up to 2 years after leaving the current business. • Employee Quits or Fired. • Independent contractors and franchisees can also be subject to NCA - we will focus on employees here.

Reasonable in area and line of business

• The NCA cannot be "overbroad" • A NCA can only prevent an employee from working in the same "line of business" as the employer. • This includes reasonable future plans to expand the business. • So, a shoe manufacturer cannot have an employee sign an NCA that will prevent them from selling real estate. • The geographic area MUST be specifically described. • In other words, the area that the employee can not work must be specifically described so that it is clear exactly what the boundaries are. • There must be some legitimate business interest in the named areas. • So, if a business operates only in Florid and only has Florida customers, the geographic area cannot include any other state!

Violation of the NCA: Remedy

• The normal remedy is an injunction. • An injunction is an order to a person to stop doing something. • It can be directed towards BOTH the employee and the new company that has hired the employee. • The injunction will demand that the employee stop working in that field, or for that employee, until the term expires. • Very rarely, if ever, will there be monetary damages. • If the NCA provides that the loser must pay attorney's fees and court costs, they are awarded. If no clause exists, the court has discretion to do so. These are fairly standard clauses, and can benefit both parties.