Is your company's non-compete enforceable under Florida Law?
To generally be enforceable under Florida law, a non-compete agreement must meet the following three requirements:
1. The agreement must be in writing and signed by the individual sought to be bound by it.
2. The agreement must set forth restrictions that are reasonable in scope—i.e., time, geographic area, and line of business.
3. Finally, the non-compete agreement must be for the purpose of protecting one or more of a company’s
“legitimate business interests.”
A non-compete agreement that broadly prohibits competition per se is a violation of public policy and thus void. Strong non-compete agreements, therefore, are narrowly tailored to address these statutory requirements. Outside of making sure the agreement is in writing and signed by the person to be bound, the most important consideration is whether the agreement is actually for the purpose of protecting a legitimate business interest. This is because a non-compete agreement that is unreasonable in scope (time, area, or line of business) may be modified, or “blue penciled,” by a court to be reasonable in those respects and enforceable against the party that signed it.
As provided by Section 542.335, Florida Statutes, legitimate business interests include, without limitation: (1) trade secrets; (2) valuable or confidential information that is not technically a trade secret; (3) substantial relationships with specific clients (whether existing or prospective); (4) goodwill associated with an ongoing business reputation, trademark, physical location, marketing region, or other business practice; and (5) specialized training. Additionally, the Florida Supreme Court has ruled that business referral sources may also be deemed a legitimate business interest. For a non-compete agreement to be effective in this regard, the employer should ensure that the agreement is tailored to address the specific aspects of the business that give it a competitive advantage. Those type of matters will often be deemed legitimate business interests, and they should be identified as precisely as possible in the agreement.
Another important consideration is for the agreement to set forth restrictions that are reasonable in time, area, and line of business. Section 542.335, Florida Statutes, addresses the time periods that are presumed reasonable in various contexts. For example, as to a former employee or independent contractor not associated with the sale of a business, a restriction against competition of six months or less is presumed reasonable, and a restriction of more than two years is presumed unreasonable. Upon sufficient evidence, however, courts have found a restriction longer than two years to be reasonable under the particular circumstances.
Like the legitimate business interest inquiry, whether the geographic area or line of business restrictions are reasonable is dependent on the specific facts of the situation. For example, a company that develops software specifically for flight control systems would likely not be able to enforce a broad restriction prohibiting an employee from working for any other software development company without narrowly tailoring the
prohibition to those companies that compete in the flight-control-system market place. Similarly, a construction equipment sales representative with a Florida sales territory should not be prohibited from taking a similar job in California selling strictly to California customers. Such overly broad restrictions would most likely be deemed unenforceable.