If You’re Looking to Protect Your Business With a Non-Compete, Make Sure It’s Done Correctly
If you have a business, you may be considering asking employees or co-workers to sign non-compete agreements. In many cases, as a business owner, you may have legitimate reasons for wanting such agreements. But there’s danger in those agreements—if not properly worded and in conformance with Florida law, you could find that the agreement you thought was protecting you could have no force or effect at all.
What is a Non-Compete?
As the name implies, non-compete agreements restrict a person’s ability to work for a competitor, or to go into business on their own against you, after their employment with you ends (voluntarily or not).
Businesses may spend a good amount of time and money training employees, and don’t want them leaving to work for the guy across the street with the knowledge and expertise gained.
In business sales, if you purchase a business, you don’t want the person to whom you just paid thousands of dollars opening up shop across the street from you (while you’re still paying them the business purchase price, in some cases).
Hence, the usage of non-compete agreements has arisen to protect businesses in these situations.
It’s worth noting that a non-compete agreement only restricts an employee’s ability to work in competition with you, or to work in the field in which your business operates. It does not necessarily prevent usage or sale of private information, trade secrets, customer lists, or solicitation of your employees or customers. Those issues of course can be dealt with and protected separately from a non-compete agreement.
When an Agreement is Enforceable
To be legally enforceable, a covenant restricting someone’s right to work must:
- Be reasonable in time and geography – Restricting someone from working in a given field for 10 years, for example, may be unreasonable and unenforceable. Florida laws contain guidelines of the time frames that will generally be considered reasonable—usually from 6 months to 2 years.
- Be needed to protect a legitimate business interest – a business owner can’t just use a restrictive covenant to discourage an employee from leaving, as a punitive device to coerce employees into staying, or as a tool to eliminate competition. Rather, the restriction must bear a relation to a reasonable business interest.
- This requirement can be met by being specific and narrow. An agreement that, for example, restricts someone from working in “social media marketing platforms,” is more likely to be valid than one that simply restricts “online marketing” or “internet-based businesses.”
- Restrictions preventing an employee from soliciting your previous or past clients or customers generally does not signify a legitimate business interest, unless they have an ongoing business relationship with you.
- Be signed by the person you’re seeking to enforce the covenant against – this sounds obvious, but many businesses mistakenly put a restrictive covenant in a “disclaimer,” or other document which does not need to be signed by the employee. This is a mistake.
Non-compete agreements can be an effective way to protect your business interests. But courts also need to protect the rights of people to freely work and find employment. For this reason, the laws surrounding such agreements can be highly nuanced. Make sure your agreements have been reviewed by an attorney before you think they will protect your business.
Don’t leave the important documents and agreements in your business to chance. Contact Tampa business attorney David Toback to discuss your needs and make sure everything is handled correctly.