A non-compete is a clause in a contract, typically signed at the start of a business relationship, that states an employee cannot enter into competition with an employer after the employment period is over. While the contents of the non-compete vary from business to business, they may attempt to prohibit the employee from working for a competitor company or competing individual, starting a company that offers the same products or services, or recruiting former colleagues to join the new business (although this can also be accomplished through a non-solicitation agreement).
Like a number of other states, Florida recognizes that non-competes serve legitimate business interests. They help protect a company’s trade secrets, confidential business information, and client relationships, as well as a company’s goodwill.
Legal Framework for Non-Competes
Non-compete agreements are enforceable in Florida if they meet certain requirements. Florida Statute 542.335 governs the enforceability of non-compete agreements. Under this statute, non-compete agreements must be in writing and signed by the person against whom enforcement is sought. The statute states that non-compete agreements with employees, agents, and independent contractors are presumed reasonable if they are six months or less in duration, and presumed unreasonable if they are greater than two years in duration.
Requirements for Enforceability
Under Florida law, non-competes may be enforced by the employer, as long as they are reasonable with regard to time (see above), and geographical area. They must also protect the legitimate business interest of the employer as defined by Florida statute. Even where the restrictions in the agreement are found to be unreasonably broad, the Court has the authority to modify the agreement to impose more reasonable restrictions.
Effects on Job Mobility
Changing jobs (job mobility) is one of the most common ways employees receive higher pay. In many cases, job hopping, especially early in a career, can correlate to higher lifetime earnings. Non-compete agreements can limit where people can work and decrease competition between industries. The result can be a reduction in overall wages because workers have less of an opportunity to bargain for higher wages and better workplace benefits.
Impact on Employer-Employee Relations
Tens of millions of workers in the U.S. have signed non-compete agreements with their employers. In fact, it is so common that many employees don’t give it much thought until after they decide to leave the company for greener pastures. However, if a company’s non-compete is too broad or too restrictive, it could persuade top prospective employees to look elsewhere.
It is not a good idea to require all employees to sign a boilerplate non-compete. Many employees will not have access to trade secrets or be able to steal clients away. For these employees, forcing them to sign a non-compete doesn’t make sense and could harm employer-employee relations in the long run.
Future of Non-Compete Legislation
Approximately one in every five American workers are subject to a non-compete agreement, but that could change soon. Earlier this year, the Federal Trade Commission (FTC) proposed to ban non-compete clauses for all workers with no exceptions. The proposed rule would prohibit employers from entering into non-compete clauses with their workers, including independent contractors.
Additionally, it would require employers to revoke existing non-compete clauses and notify their employees that the clauses are no longer valid. Non-disclosure agreements and non-solicitation agreements would not be included in the rule unless they are so broad in scope that they function as a non-compete.
Once the FTC releases a final rule, it will probably face legal challenges from various groups.
What it Means to You?
For now, non-compete clauses remain valid in Florida as long as they adhere to Florida statutes. This is a good time for businesses to revisit their non-compete agreements and plan ahead for the FTC’s possible rule. Could there be other ways to protect your business interests?
I’m Rob Robinson, and for more than three decades I have represented private and public employers in Southwest Florida. As a sole practitioner, I can assure you that your questions and concerns about non-competes are answered with individualized attention and care. Please contact my office today.