Employees and Employers — Here’s What You Need to Know About Non-compete Agreements
You just started a new job and your new employer has tasked you with reviewing company policies and completing new employee onboarding paperwork—including signing a non-compete agreement.
Perhaps you have signed a non-compete agreement with a previous employer. Maybe this is your first time encountering a non-compete agreement. Regardless of your level of familiarity, it is important to understand how a non-compete agreement impacts your employment with past, current, and future employers.
This blog post will provide a brief overview of Florida non-compete agreements and answer specific questions about non-compete agreements and their enforceability.
Non-compete Agreements in Florida
A non-compete agreement is a legal agreement in which one party (the employee) agrees not to compete in a specific area of business with the other party involved (the employer) for a certain period and oftentimes in a specific geographic area.
A non-compete agreement may be a standalone contract or it may be part of an employment agreement, an offer letter, a contract for the sale of a business, or even a separation agreement, among others.
Typical non-compete restrictions include but are not limited to, limitations on a former employee’s right to:
- Work for an employer’s competitor
- Start a competing business
- Solicit clients or resources that belong to the employer, including other employees or contractors
- Use confidential business data or trade secrets that belong to the employer, such as client lists or business plans
To determine whether or not a non-compete agreement is enforceable depends on several factors, including that the agreement must be in writing, the restrictions must be reasonable, and the agreement must protect the employer’s legitimate business interests, such as the protection of trade secrets and confidential information, among others.
Generally, non-compete agreements are enforceable in Florida if they meet all of these requirements. However, whether a specific non-compete agreement is enforceable depends on the circumstances and restraints contained in an agreement. Therefore, any employer or employee concerned about enforceability of a Florida non-compete agreement should seek counsel from a Florida attorney.
How Long Can a Non-Compete Agreement Be Enforced in Florida?
Unfortunately, the answer to this question is not straightforward. However, under Florida law, there are basic presumptions regarding the period of time a non-compete can reasonably and legally be enforced against a former employee.
Generally, non-compete restrictions against a former employee are presumed reasonable if lasting six months or less from the time the employment relationship ends. Restrictions against former employees are presumed unreasonable if they are longer than two years. That leaves quite a lot of gray area to debate whether a time restriction is reasonable under Florida law.
Adding to the confusion, if a non-compete restriction is based solely on the protection of trade secrets, the restriction may be considered reasonable if the restriction lasts five years or less, but may be considered unreasonable if lasting more than ten years.
Note, however, that these basic presumptions can be rebutted or disproved based on the facts and circumstances underlying a non-compete agreement. For example, in a 2013 case, a Florida court found that a three-year non-compete restriction was reasonable to protect a former employer’s legitimate business interest in servicing contract renewals, despite the presumption that restrictions lasting longer than two years are unreasonable. See Avalon Legal Info. Servs., Inc. v. Keating, 110 So. 3d 75 (Fla. 5th DCA 2013).
What Happens If an Employee Breaks a Non-Compete Agreement?
If an employee breaks or violates the terms of a legally enforceable non-compete agreement, the employer may file a lawsuit against the employee and ask a court for an injunction to stop the employee’s allegedly improper activity.
Additionally, the employer may attempt to recover financial damages incurred because of the employee’s conduct in violation of the non-compete agreement. The specific remedies available to the employer may be outlined in the non-compete agreement signed by the employee.
Therefore, it is vitally important for employees to understand their non-compete agreements and the consequences of violating the terms of the agreement. If an employee is concerned about understanding a non-compete agreement or is concerned that they may have violated an agreement, the attorneys at BT Law Group can provide assistance.
How Would a New Employer Find Out About a Non-Compete Agreement With a Prior Employer?
Understandably, a prospective or new employer may be concerned about hiring a new employee that is bound by the terms of a non-compete agreement. Thus, during the hiring process, an employer may ask a candidate whether they are bound by a non-compete agreement with a current or former employer and may request a copy of any such non-compete agreement.
An employer may do this because:
- It wants to ensure it is hiring a candidate that can perform services without breaching a non-compete with another company
- It wants to limit its own liability in the event the new employee does violate an enforceable non-compete agreement
The new employer may request information about and/or copies of a candidate’s prior non-compete agreement during the interview process or in an offer letter.
Often, in an offer letter or employee handbook, a new employer may state that if an employee fails to inform the company of a prior non-compete agreement, and the employer or the new employee receives a cease and desist letter due to a breach of the agreement, the new employer has the right to terminate the employee’s employment. Therefore, it is important that a new employee be forthright with a new or prospective employer about prior non-compete agreements or else risk being fired.
Are Non-Compete Agreements Limited to Certain Industries or Job Positions?
Employees in many industries and job positions may be asked to sign a non-compete agreement. However, there are certain industries and positions where non-compete agreements are more prevalent.
Common industries include, but are not limited to:
- Marketing and Advertising
- Pharmaceuticals and Biotech
- Business Services
- Real Estate
- Wholesale and Retail Trade
- Information and Technology
Note, however, not all employees may be required to sign a non-compete agreement in these industries. Furthermore, the enforceability of a non-compete agreement could be impacted by the industry at issue.
Common job positions, regardless of industry, which is frequently subjected to non-compete agreements include, but are not limited to:
- Sales positions
- Marketing and advertising
- Company officers, executives, and managers
- Any position with access to trade secrets and other company confidential or proprietary information (such as client lists, financial and sales records, business plans, and operations, research and development, etc.)
Additionally, in Florida, the use or enforceability of non-compete agreements may be prohibited in certain industries (as with attorneys) or restricted for certain professions (as with physicians).
What Happens If a New Employer Learns About an Employee’s Non-Compete With a Prior Employer?
If a new employer finds out about a new employee’s prior non-compete agreement, several things may occur. As mentioned above, a new employer may terminate the employee to avoid being sued for claims such as tortious interference with a business relationship. Or, the new employer may hire the employee on the condition that if the new employer and/or the employee receives a cease and desist letter from a prior employer regarding a non-compete agreement, the employee’s employment with the new company may be terminated.
Alternatively, if an employer is already aware of a new employee’s prior non-compete agreement, the new employer may choose to retain the new employee and may even defend the new employee against any action taken against the new employee by the former employer. Thus, it is generally recommended that a new employee disclose a prior non-compete agreement to a new employer.
Can an Employee Violate a Non-Compete or Non-Solicitation Agreement If a Client Is Unhappy With a Former Employer’s Services?
Restrictive covenant agreements often contain restrictions on an employee’s ability to “poach” or solicit an employer’s clients after the employment relationship ends. These types of restrictions may also be found in standalone non-solicitation agreements or employment agreements, among others.
Interestingly, even if a former employee does not actively or directly solicit a former employer’s clients away from doing business with the former employer, the employee may still be in breach of a non-compete or non-solicitation agreement.
For example, in a recent Florida case, a former employee was found in violation of a non-solicitation restriction when he went to work for his former employer’s competitor performing the same services. See AmeriGas Propane, Inc. v. Sanchez, 335 So. 3d 1253 (Fla. 3d DCA 2021).
In this case, several of the former employer’s clients stopped doing business with that employer and enrolled for services with the competitor (the new employer). When the former employer filed suit against the former employee, the employee attempted to explain that he had not breached his agreement because he had not actively solicited the clients and that the clients were unhappy with the former employer’s services.
However, the court found that the employee had indeed either directly or indirectly solicited the former clients when he visited former clients and told them to call him if they were having issues with the former employer. The court specifically stated that it did not matter if the clients attributed switching to the competitor because they were unhappy with the former employer’s services—the issue was that the former employee had solicited the clients despite having agreed not to do so in the non-solicitation agreement.
Thus, employees should fully understand and comply with the restrictions in a non-compete or non-solicitation agreement.
Can an Employee Get Out of a Non-Compete Agreement If an Employer Does Not Pay the Employee All Wages and/or Commissions Owed?
The answer to this question may depend upon the exact terms of the agreement an employee signs.
For example, an employee signs an employment agreement with a new employer that includes non-compete restrictions, as well as a clause that requires the employer to pay all wages (including commissions or bonuses owed) in a lump sum upon termination of employment. If the employer fails to pay the employee all wages owed upon termination in violation of the employment agreement, the non-compete restrictions in the agreement may not be enforceable against the employee.
Further, the answer may depend on whether the agreement has language indicating that the restrictive covenant is an independent clause.
Regardless, Florida employees seeking to get out of a non-compete agreement based on an employer’s breach of the agreement should consult with a Florida attorney to determine whether or not such a defense or explanation is viable.
Need Help With Non-Competes?
Non-compete agreements are common, yet complex, and employees may not fully understand the restrictions in such an agreement until it is too late. Florida employees who are considering an offer of employment contingent on signing a non-compete agreement, or who would like to better understand the limits of their non-compete agreement, should seek legal counsel well-versed in Florida non-compete laws.
Additionally, Florida employees who have been sued or threatened to be sued by an employer for breach of a non-compete agreement should immediately contact a Florida attorney.
Also, BT Law Group can assist employers in drafting enforceable non-compete and non-solicitation agreements. If necessary, BT Law Group can help enforce the terms of these agreements by taking immediate steps, including sending a cease and desist letter, filing a lawsuit, and/or seeking an injunction from a judge.
BT Law Group can assist Florida employees and employers in reviewing and negotiating non-compete agreements, as well as enforcing, or defending against the enforcement of, these agreements.