Clients often ask me about the application of non-competition agreements because they seem to be everywhere. An employee is subjected to a non-compete agreement, or an employer is trying to subject its employees to a non-compete agreement. Moreover, non-compete agreements can be used in contracts between companies to limit the future conduct of the other as a result of their business dealings.
Florida law statutorily protects the freedom and rights of employees and employers because each has the authority to operate in their own manner and make a living without overbearing restrictions.
As a result, in the absence of a properly drafted non-competition agreement that meets specific criteria, Florida law will not allow an employer to restrict the future employment of a departing employee. On the other hand, the law is not ignorant to the sanctity of certain private interests that need protection; therefore, Florida law allows “valid restraints of trade” in which an employer and an employee can agree in a signed writing on post-employment restrictions. These agreements require a few specific provisions: First, that the employer demonstrates a protectable interest in restricting the post-employment activities. The “protectable interest” must be reasonable, which means that the interest has great significance to the welfare and success of the business.
Second, Florida non-competition agreements also require a reasonable restriction on the geographic area. The geographical limitation must not be over-broad; for instance, you cannot necessarily ban an employee from engaging in work across the entire world – or perhaps an entire country. Of course, the restriction is dependent upon the protectable interest and any applicable trade secrets; however, the circumstances will dictate the extent of a geographical limitation.
The third element is the temporal/time limitations. To force an employee from refraining to work in a specific industry, for a specific employer, and in a specific geographical location for a period of time must be reasonable from a time standpoint. The Florida statute itself sets forth additional time frames it deems reasonable depending on the level of the departing employee and that employee’s access to protected or confidential information. The time limitations is dependent upon the circumstances surrounding the situation but it must not be over-broad in comparison to the protectable interest and geographical location an employee is being restrained from working in.
Many states, however, have recently started tightening the reins on non-competition agreements. In Massachusetts, for example, state representatives voted unanimously in late June to reform state non-competition law. The state added a “garden leave” clause, requiring employers to pay a half-salary to any former employee unable to work due to a non-competition agreement. The rationale is that state representatives are worried about losing potential industry to states like California, where Courts generally refuse to enforce non-competition agreements.
Because Florida law favors free competition, Courts strictly construe non-competition agreements. A recent Florida federal court, for example, rejected a non-competition agreement, holding that the former employer failed to establish a business interest worthy of protection. (See IDMWorks v. Pophaly, — F. Supp. 3d — at *4 (S.D. Fla. June 23, 2016).
In IDMWorks, the Court held that although the former employee breached his non-competition agreement, the former employer failed to show that the agreement was reasonably necessary to protect a legitimate business interest. The former employer, seeking injunctive relief from the court, argued that it had a legitimate business interest in the training it provided to employees. The court noted that an employer under certain circumstances can protect its training methods as a legitimate business interest but must be able to show the training rises to the level of being specialized or extraordinary. Therefore, an employer cannot show that the training employees received was typical and comparable to other companies providing similar training. Therefore, it is important for an employer to note that there are ways to negotiate provisions into a non-compete to protect its investment into an employee, but it must show an even greater rationale for its restraints.
Ultimately, Florida employers have the legal ability to validly restrict key employees from post-employment opportunities in order to protect legitimate business interests. However, there is no guarantee what criteria a Florida court will use to determine when training is “specialized and extraordinary” enough and worth protecting. The courts will certainly apply the three (3) elements of a non-competition agreement as referenced above; however, an employer must take the extra step in their non-compete, which is to be specific about what is “typical” in an industry, and thus worthy or not worthy of protection. Don’t leave it to chance, draft with caution; moreover, contacting an attorney to assist with drafting the provisions is a good way to garner the protection that is desired.