In a highly competitive business world, companies zealously guard their share of the market. Unfortunately, departing employees might endanger a company’s client base and proprietary information. Business owners may want to consider using non-compete agreements, especially with key employees. You may have heard of non-competes, but do not currently use them. However, this article may clear up any lingering questions you have.
What Are Non-Compete Agreements?
Generally, this legally-binding document serves as an agreement between an employer and an employee. The employee agrees to refrain from competing with the employer, but during employment and for a certain period of time after leaving. These agreements may also be called restrictive covenants.
Who Should Sign a Non-Compete?
An employer could ask any employee, independent contractor, or consultant to sign this type of contract. Executives, researchers, and salespeople are often required to do so because of their access to proprietary information. However, some industries have expanded the use of non-compete agreements to other staff members.
What Kind of Activities Are Prohibited?
In some cases, the employee may be prohibited from:
- Starting a competing business,
- Working for a competitor,
- Working in certain geographical locations,
- Using their former employer’s proprietary information.
A company’s proprietary information might include:
Marketing materials, sales lists, databases, research and development data, and technology.
For example, Jackson worked his way up to senior client relations manager at a large financial institution. He had access to trade secrets, strategies, client lists, and more. After a few years, Jackson decided to start his own investment group in the same city and take all his old clients with him. His former employer may enforce Jackson’s non-compete agreement to stop him.
Are Non-Compete Agreements Enforceable?
Employers do face some limitations on enforcing non-competes.
- Time. In enforcement lawsuits, courts may look at the length of time the provisions of the agreement restrict an employee. The non-compete may be unenforceable if the time limitation is unreasonable in the eyes of the court.
- Geographical Area. Restrictions that are unreasonably broad may be voided. Also, the geographical limitations vary from industry to industry. For example, the employer might be able to limit the employee’s activities in the State of Florida, but not throughout the United States.
- Legitimate Business Interests. An employer who sues a former employee typically has to show that the non-compete served to protect the company’s business. For example, a company that makes ice cream cones might prevent employees from starting their own cone companies. However, they may not be able to stop workers from starting a company that makes hot fudge sauce.
Whether you need to draft a non-compete agreement or enforce one, it is best to consult with an experienced Florida business lawyer.
Should Your Company Use Non-Compete Agreements?
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.