Noncompete Agreements: How Solid Is Yours?

There are many misconceptions and assumptions regarding the use and effectiveness of noncompete agreements in Florida. This is not too surprising considering that judicial enforcement of these agreements is very fact-intensive and situation-specific.

Common Pitfalls with Noncompete Agreements

1. Failing to properly identify what is actually being protected. One pitfall that business owners face is that they fail to put much time or effort into evaluating what legitimate business interest they are specifically trying to protect when asking their employees to sign a noncompete agreement. These agreements are often implemented because it seems like a good business practice from a human resources perspective; however, a deeper dive into the desired protections of these agreements is critical to ensure their effectiveness and enforceability.
2. Using a noncompete agreement when nonsolicitation is desired. Similarly, a business owner may assume they need to use a noncompete agreement, when in reality they need a nonsolicitation agreement (restricting someone from taking customers, employees, etc.) or a confidentiality agreement (restricting someone from using trade secrets or other information). Business owners and managers should also remember that just because a noncompete agreement may have fit the company’s needs and business activities two or three years ago, this does not mean that such an agreement is still a good fit for the business today.

Issues to Consider when Requiring Employees or Contractors to Sign a Noncompete Agreement

To add another layer of protection to your business by implementing a noncompete agreement, there are a few questions you should ask as you get started:

1. Is the obligation to sign the noncompete coupled with some consideration (something of value)?
2. Could the employee or contractor make a valid claim that you negotiated the noncompete in bad faith?
3. Does your company have a legitimate business interest that the noncompete is attempting to protect?
4. Is the duration and geographic limitation of the noncompete reasonable to protect the company’s legitimate business interests?
5. Could the terms or conditions of the noncompete be viewed as against public policy?

Options Available to Enforce a Noncompete Agreement

Enforceability of a noncompete can vary from state to state. This can be problematic for larger companies with employees or contractors throughout the country. Florida law recognizes noncompete agreements and the protection of a business’s trade secrets and other confidential information. Typical enforcement options may include a lawsuit for damages and injunctive relief to immediately stop severe damages from violation of the noncompete agreement (often called a temporary restraining order).

Nonlegal Issues to Consider

In determining whether noncompete agreements will be in the best interests of your business, the business owner should consider how a noncompete agreement may affect employee morale or loyalty, because of the required signing of the agreement and the enforcement language in the agreement. Suing an employee who has quit or been fired might send the wrong message to current employees, even if the lawsuit is pursued for legitimate reasons.

Call Our Office

Schedule a meeting with one of our attorneys to ensure you are using the right document for your business protection needs and to navigate Florida law. We will help you craft a noncompete agreement to protect the legitimate business interests you have worked so hard to build. Contact (813) 852-6500 to schedule a consultation.