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People's Law Guide

 

Non-Compete Agreements: Often No Simple Answers

11/18/12

 NON-COMPETE AGREEMENTS: OFTEN NO SIMPLE ANSWERS   

      Many employers try to prevent executives, professionals, physicians, salespersons and other skilled staff members from joining the ranks of competitors. That’s why many employees are required to sign written commitments restricting their ability to work for competing organizations. Often, these non-compete agreements are accompanied by an additional provision preventing “confidential” information learned on the job from being used in employment elsewhere.

      Florida’s first law regulating non-compete agreements had harsh anti-employee provisions. On June 28, 1990, an updated law was implemented to provide more legal protections to employees. These revisions gave judges so much “wiggle room” when deciding whether or not to enforce non-compete agreements that case rulings became widely inconsistent and unpredictable. Florida’s legislators again rewrote the law, with the most recent changes taking effect on July 1, 1996.

      When deciding which of the three versions of the law to apply, judges determine the date the restrictive covenant was entered into and follow the law which was in effect at that time. 

June 27, 1990 and Earlier:

      Agreements entered into during this time period are enforceable under Florida’s original non-compete law.  The initial law permitted employers to enforce non-compete agreements even when unable to show they would be harmed by a former employee engaging in direct competition.

      Still, employees have a number of legal options when defending against lawsuits involving older non-compete agreements.  If a longstanding agreement was recommitted to on a later date, the non-compete law in effect at the later time would apply. In other words, if an employee signs his or her non-compete agreement annually, judges would apply the version of the law in effect at the time the agreement was last committed to, even if the provision’s terms were first agreed to decades earlier.

      Also, when convinced that serious misdeeds by an employer forced the employee to find work elsewhere, judges were given discretion to refuse enforcement of non-compete agreements. Relying on the “unclean hands” doctrine, courts won’t act as enablers by rewarding employers who engage in misconduct. Further information on some of the types of employer wrongdoing which can invalidate rights toward enforcement of restrictive covenants appears later in this article.

June 28, 1990 - June 31, 1996:

      Agreements entered into during this time period are enforceable only when judges determine that the competitive restrictions to be imposed are “reasonable” and won’t be harmful to “public health, safety or welfare.” Judges may also consider the severity the of the economic hardships to be imposed on the employee. If unconvinced that the employer would be “irreparably harmed” by the employee engaging in direct competition, judges may decline enforcement on this ground, too.

      With these criteria so open to interpretation, judicial rulings were as likely to be based more upon a judge’s social and philosophical views than on the factual circumstances of a case. Many employers have found it particularly difficult to obtain enforcement of restrictive covenants dated on or after June 28, 1990 and prior to July, 1996.

      Employees can also utilize the previously mentioned “unclean hands” defense, which is explained at the bottom of the article.

July 1, 1996 - Present:

      This multifaceted version of the restrictive covenant law addresses not only whether an employee can work for a competitor, but also whether former clients can be solicited and if confidential information gained from prior employment can be utilized in a new job.

      Confidential information may include making use of lists of customers, clients or patients.

      Under this newer law, employees still have “escape valves” when defending against claims of running afoul of agreements not to work competitively against a former employer or to solicit clients.

      Judges won’t enforce restrictive covenants imposed solely to punish workers who seek employment elsewhere. Employers must demonstrate having legitimate business interests worthy of protection.

      Unless an employer provides compelling reasons otherwise, Florida judges will presume that employment restrictions lasting in excess of 24 months are unreasonable. When the sought restriction is based upon a former employee’s knowledge of trade secrets, the law presumes restrictive covenants running in excess of ten years to be unnecessarily long.

      Employees can also utilize the previously mentioned “unclean hands” defense, explained in greater detail below.

“Unclean Hands” of an Employer:

      By showing that employer misconduct led to their seeking work elsewhere, workers can ward off enforcement of restrictive covenants which were entered into at anytime. So judges won’t be forced into rewarding illegal or certain types of abusive conduct, Florida law acknowledges that restrictive agreements should not always be enforceable. Here are some actions which judges may agree have caused employers to forfeit their rights in non-compete cases:

            a. Illegal discrimination, such as sexual harassment, racial prejudice, illegal firings or other unlawful forms of workplace bias.
            b. Breach of contract, including refusal to pay owed wages, bonus compensation or failure to honor other agreements. 
            c. Employer engages in unlawful conduct or seeks to have the worker engage in illegal acts. Florida doesn’t want residents to be punished when leaving the employment of organizations which favor violating federal or state laws or any governmental rule, regulation, code or ordinance. Also benefitting from these protections are employees  who have been retaliated against for objecting to illegal employment-related conduct of other workers.

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