Perhaps it is because of current economic conditions or simply because the topic has not received much public discussion lately, but more and more employers are asking whether covenants not to compete are enforceable in Florida. To my surprise a majority of my business clients believe that non-compete agreements are not enforceable.
Even many employers who have their employees sign non-competes suggest “it is just to scare people because they cannot be enforced.”
These employers seem extremely surprised when I tell them how wrong they are.
Perhaps this would also come as a surprise to employees who likewise might believe that non-compete agreements are unenforceable in Florida.
Despite the apparent wide spread perception to the contrary, non-compete agreements are enforceable in Florida. In fact, Florida has historically been one of their most rigid enforcers. Prior to 1991, non-competes in Florida were enforced in virtually every circumstance, with courts only modifying the time frame and geographic scope when necessary.
Then, in 1990 the Florida legislature followed suggestions of the Florida Supreme Court and amended Florida’s statute governing non-competes in an effort to provide more equitable treatment of employees.
However, by 1996 the flood of litigation and differing court opinions on to how to enforce the newly amended statute led the Legislature to start from scratch with an entirely new statute.
Today, courts look at several factors in determining whether to enforce a covenant not to compete. However, these factors may not be the ones everyone might think.
For example, Florida law specifically states that a court may not consider any “economic or other hardship” which might be placed on the person against whom the covenant is to be enforced.
This responds to the biggest comment I hear from employers and employees: “But the court cannot keep someone from working in the only field they know.” Wrong; So long as the covenant meets the statute’s other criteria, then yes, the court can and likely will keep someone from working even if it is the only job they know.
Additionally, if the covenant is well drafted it might even be enforced against someone who is fired or someone who is owed money because the enforcing party breached some other promise. The agreement might even be enforced by someone who was not a party to the original agreement because the agreement was assigned or the third party was properly identified in the original agreement.
In their analysis of whether to enforce a covenant not to compete, the courts will look at whether: 1) the covenant is in writing and signed, 2) reasonable in time, geographic area and line of business, and 3) it is reasonably necessary to protect a legitimate business interest of the enforcing party.
For reasonableness of time, the Florida statute provides a range of guidelines depending on whether the covenant relates to an employee, a franchisee or licensee of a trademark, or the seller of a business.
Geographic location must be addressed on a case by case basis and will depend on the type of business activity involved.
The trickiest part of the analysis is whether the covenant is reasonably necessary to protect a legitimate business interest. The Florida statute defines legitimate business interests as including: 1) trade secrets; 2) confidential business information; 3) substantial relationships with specific prospective customers, patients or clients; 4) customer, patient or client goodwill associated with an ongoing business by its: use of a particular trade name; specific geographic location; or, specific marketing or trade area; and, 5) extraordinary or specialized training. Although the statute provides more detail than written here, not all businesses are able to establish these legitimate business interests or that enforcement is reasonably necessary to protect them.
Whether you are an employer, franchisor, licensor, investor, or the buyer of a business, it is important to make sure you understand your rights and to ensure your non-compete agreements are well drafted so they are enforceable and take full advantage of all available rights. But for those employees or sellers of a business wondering what to do because they are subject to a non-compete, don’t despair because a large number of scenarios exist where non-competes may not be enforceable.
So my answer when asked the question these days is that Florida will absolutely enforce covenants not to compete agreements, but every agreement and every fact scenario are different and those are what will be the deciding factors.
David H. Reimer, Esq.
Reimer & Rosenthal LLP
2115 North Commerce Parkway
Weston, FL 33326
(954) 384-9200
david@rrcounsel.com