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Understand noncompete agreements before using them

On Behalf of | Aug 25, 2020 | Employment Law |

No business wants to spend resources to make someone a vital part of their organization, only to have that person use those resources and knowledge to leave and become a competitor.

That is why noncompete agreements and clauses are appealing. However, before employers decide to draft one or include one in an employment contract, it is important to understand what Florida law says about noncompetes.

An overview

Florida law governing noncompete agreements appears in Section 542.335 of the Florida code. This is the statute that governs all noncompete agreements entered into after July 1, 1996.

These laws seek to strike a balance between enforcing employer’s legitimate business interests and a person’s interest in freely pursuing a career. And, the state will enforce bona fide noncompete clauses and agreements.

Section 542.335 codifies the legitimate business interest test that state courts use to determine whether to enforce non-compete clauses and agreements. A legitimate business interest can be used to justify the need for a noncompete.

These include: extraordinary or specialized training; an ongoing business or professional practice, by way of trade name, trademark, service mark, or trade dress; trade secrets (as defined at Section 688.002(4)); valuable confidential business or professional information that otherwise does not qualify as trade secrets; substantial relationships with specific prospective or existing customers, patients, or clients; and customer, patient, or client goodwill associated with specific geographic locations, or specific marketing or trade area.

What is reasonable?

There are three rebuttable statutory presumptions of reasonableness and unreasonableness. First, is for noncompetes that are for six months or less. They are presumed reasonable, and those for more than two years are presumed unreasonable.

Second, is for service- or trademarks of former distributors, licensees, dealers, or franchisees. Terms of one year or less are presumed reasonable, while terms of more than three years are presumed unreasonable.

Finally, the third presumption relates to the sale of interests or assets of a business. The presumption of reasonableness is for terms less than three years and unreasonableness, seven years or more.

This is a very preliminary discussion and should not be taken as legal advice. To understand one’s specific circumstances, a consultation with an attorney is recommended.