If your organization uses non-compete clauses or agreements, you may have assumed that its best to draft them as broadly as possible in order to cover all situations. Unfortunately, many courts are increasingly scrutinizing these agreements and may find them unenforceable if they limit employees’ employment prospects too much.
In Florida, for example, the statute authorizing noncompetes states that these agreements must be “reasonably necessary to protect the legitimate business interest.” Last year, the Florida Supreme Court reaffirmed this reasonableness requirement and encouraged trial courts to actively assess the reasonableness of noncompetes on a case-by-case basis.
The Florida constitution protects an individual’s inalienable right to work, and restraint of trade is generally considered unlawful. Therefore, the statute authorizing noncompetes should be read as carving out an exception to what would otherwise be unlawful restraint. Unreasonable use of that exception may render the noncompete unenforceable.
In other words, noncompetes involving Florida employees are most likely to be enforced if they narrowly define the prohibited behavior and reflect the company’s legitimate business interests. In fact, the best fit for a particular situation may not be a noncompete at all, but rather a confidentiality, nondisclosure or non-solicitation agreement. These other types of restrictive covenants carve out a smaller set of prohibited activities.
The agreement should not only be of the least restrictive type to meet your goals, but it should also be limited to a reasonable geographic area and time period.
For example, a full noncompete agreement with broad geographical reach and an extended time period should be reserved for very senior executives. A wide-ranging agreement may legitimately be necessary to protect information about the company’s strategic direction.
A noncompete for an R&D employee with information about new products and services might be appropriate, but with less restrictive geographical and time limits.
For a salesperson, the most reasonable choice might be a non-solicitation agreement restricting contact with your customers.
For lower-level employees, the courts might not accept a noncompete with broad geographical reach and an extended time period. And, if they find your agreement unenforceable, it’s like having no agreement in place at all.
The key to an enforceable non-compete is to tailor it to your legitimate business goals. If you’re seeking to protect relationships with clients and referral sources, you might do best with a non-solicitation agreement. Protecting a trade secret recipe? A nondisclosure or confidentiality agreement might be just what you need. To determine what type of agreement is right in a specific situation, discuss your needs and goals with an employment law attorney.