Originally published in Tampa Bay Business and Wealth, April 2019
Non-competition and non-solicitation agreements, also known as restrictive covenants, are commonplace in today’s businesses. Below are answers to frequently asked questions and tips to employers and employees on how to approach negotiating them.
At their core, restrictive covenants aim to protect employers from unfair competition by a former employee. To that end a non-compete would prevent an employee from working for an employer’s competitor for a period of time and within a designated area. A non-solicitation agreement prevents the employee from soliciting business from some, or all, of the employer’s customers or soliciting the employer’s other employees to join the competitor.
Are they ever enforceable?
Yes. Under Florida law, restrictive covenants are enforceable if:
• The agreement is in writing
• It is signed by the employee
• The agreement is “reasonably necessary” to protect the “legitimate business interests” of the employer
• To satisfy the last factor an employer must show the restrictive covenant reasonable if it is for less than two years and applies only to the geographic region in which the employee worked.
TIPS FOR EMPLOYERS
Be Reasonable
Employers anxious to protect their business reputation and customer relationships often ask attorneys to draft restrictive covenants as broadly as possible. Although understandable, this approach is counterproductive as courts rarely enforce non-compete or non-solicitation agreements that are too broad. Additionally, restrictive covenants that are too broad, for example barring the employee from working for a competitor anywhere in Florida, essentially ensure an employee will attempt to violate the agreement. This leads to additional costs for an employer including damage to customer relationships and paying legal fees to stop an employee from violating the agreement.
A better approach is to draft restrictive covenants that are .reasonable, those that strike a balance between protecting the employer from harm and giving the employee a reasonable chance to earn a living.
Be Clear
Enforceable non-solicitation agreements typically prevent an employee from soliciting business from an employer’s customers with which the employer had a “substantial relationship.” But a hastily drafted non-solicitation agreement might allow the employee to still do business with your customers if the customer contacts the employee first. It is therefore critical that you agreement is clear in its terms and provides the protection you desire.
TIPS FOR EMPLOYEES
Read and negotiate
Too often employees sign restrictive covenants without having read them or negotiated the terms, often mistaken that they are not enforceable. A carefully drafted non-compete can create considerable obstacles to finding a new job in the same field, including forcing an employee to move to another state. Make sure you read the entire contract to understand the restrictions being placed on your ability to obtain a new job. Do not be afraid to negotiate terms that you deem unreasonable. You can always refuse to sign the restrictive covenants or refuse to work for the employer if the employer will not negotiate in good faith.
Put Everything in the Contract
Almost any employment contract has an “Integration” clause. This legal term says the written employment contract is the entire agreement between the employer and employee and any other agreements between the parties,. including oral promises made by the employer not specifically in the agreement are void. Some employers ask employees to sign restrictive covenants but promise to not enforce the terms of the restrictive covenants upon the employee’s termination. If there is an integration clause in the contract such a promise is meaningless. Your employer can (and likely will) require you to comply with the restrictive covenants you signed, denying that any such promise existed.
Patrick M. Causey is a shareholder at Trenam Law. He is a civil trial lawyer representing clients in a variety of commercial matters including breach· of contract, non-competition and non-solicitation agreements, trademark and copyright infringement litigation, fraud, partnership disputes, unfair trade practices, business torts, real estate litigation and trade secrets litigation. Patrick also represents lawyers, financial advisors and other professionals against claims of malpractice and breach of fiduciary duty and frequently lectures 011 the topic of legal malpractice at national seminars and conferences: He can be reached at pcausey@trenam.com.
