Survival In A Competitive Market

By Hayward Dykes Jr.

Laying off critical employees is never easy. It is even worse when you find that some of these employees are taking trade secrets and clients to a competitor or opening up shop next door. What can you do?

While most people have heard of non-compete agreements, they are sometimes confused on what these important agreements can and cannot cover. Often questions arise about whether Florida law enforces such agreements, what needs to be included to make them enforceable, how restrictive they can be, and what your rights are if someone violates one.

IS A NON-COMPETE AGREEMENT ENFORCEABLE IN FLORIDA?

Yes. Non-compete agreements are enforceable in Florida. The Florida legislature has specifically addressed such agreements in Section 542.335 of the Florida Statutes. First, in order to establish an enforceable non-compete agreement in Florida, you will need to make sure the agreement is in writing. Next, you will need to establish and prove the existence of a “legitimate business interest” that needs protection.

WHAT IS A LEGITIMATE BUSINESS INTEREST?

Thankfully, the legislature has set forth in the statute what constitute “legitimate business interests.” Specifically, Florida Statute 542.335 recognizes the following: 1) trade secrets; 2) valuable confidential business or professional information; 3) substantial relationships with specific prospective or existing customers, patients, or clients; 4) goodwill for a business; and 5) extraordinary or specialized training. While this list is not exhaustive, it does cover what a business will normally seek protection for through a non-compete agreement.

WHAT IF I DON’T HAVE A LEGITIMATE BUSINESS INTEREST TO PROTECT?

If for some reason you and your attorney cannot think of a legitimate business interest to protect, then the law is clear: Any restrictive covenant not supported by a legitimate business purpose is unlawful, void, and unenforceable. However, a legitimate business interest will exist for most businesses, especially those in management who deal with sensitive business information and trade secrets.

I HAVE A LEGITIMATE BUSINESS INTEREST TO PROTECT. HOW RESTRICTIVE CAN I MAKE THE NON-COMPETE AGREEMENT?

My advice to clients is that non-compete agreements be only restrictive enough to protect their business interests. I normally begin by identifying with the business owner those business interests that need protection. Next, we determine the length of time and geographic area the agreement will cover.

The statute again gives us some guidance in this area by establishing guidelines on what time frames are presumed to be reasonable. For example, a non-compete agreement for a former employee is presumed reasonable if it contains a restriction of six months or less. The restriction would be presumed unreasonable if it exceeds two years. Based on the business interest that is being protected, some non-compete agreements could have restrictions of up to ten years.

In addition, the geographic area of a non-compete agreement is important. It would not be improper for a large company that does business in many states to seek restrictions for each of the states or for a region. Smaller businesses may be limited to a smaller geographic area, perhaps a specific county or counties, or within so many miles of the business.

I HAVE A NON-COMPETE AGREEMENT, AND I BELIEVE A FORMER EMPLOYEE IS VIOLATING THE AGREEMENT. WHAT CAN I DO?

When a party violates a non-compete agreement, that party is subject to a legal action for damages and injunctive relief. Common practice is to file a lawsuit for breach of the non-compete agreement along with a motion for injunctive relief. Courts have the right to enter an order that prohibits further violation of a non-compete agreement through a temporary injunction. At the hearing, you will need to be ready to show the court why the injunction is warranted. If you are successful, the statute does allow for the court to award attorney fees to the prevailing party. If an injunction is granted by the court, it will stay in place until the resolution of the case.

Always consult an attorney when drafting a non-compete agreement for your business. A properly drafted non-compete agreement is a great tool. It can prevent a trusted employee from walking away with valuable clients, business, or trade secrets you worked so hard to establish.

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Hayward Dykes Jr. is an attorney and partner with the law firm of Conerly, Bowman & Dykes, LLP. If you would like more information on this topic, please contact Mr. Dykes at (850) 813-5118 or hdykes@destin-law.com. This article is for informational purposes only and should not be considered legal advice.