Can I Require Employees to Sign a Non-Compete in Florida?
Florida has a reputation for its business-friendly environment, but the state has its own set of rules regarding non-compete agreements. If you are a business owner or entrepreneur wondering whether you can require your employees to sign a non-compete agreement, the answer is not a simple one. Florida law places certain restrictions on the enforceability of non-compete agreements, and it is essential to understand these limitations before implementing such agreements in your business.
When you have someone working for you, they may have access to things like your trade secrets and other sensitive corporate data. If your employee leaves your business and goes to work for a new employer, you do not want them to take the playbook with them. However, there are some instances where it is impossible to prevent employees from using the knowledge they gained while working at your company. Therefore, a company may have an interest in restricting an employee from working at specific places altogether. The question is how you can achieve this legal result under Florida law.
There are instances when you can require an employee to sign a non-compete agreement. This document limits where they can work for a set amount of time after leaving your company. You can move to enforce these restrictions if the former employee tries to violate them, but you must also prepare for the employee to dispute the legal validity of the agreement. They may argue that the non-compete agreement is an overbroad restriction placed on them.
In many cases, these arguments play out in court before a judge. Therefore, you need legal advice from a business law lawyer in St. Petersburg, FL who can draft or review an agreement. They can provide insight on how to draft the contract in a way that makes it enforceable. If you end up in litigation over a non-compete agreement, a business lawyer can represent you in court.
What Is a Non-Compete Agreement?
A non-compete agreement is an employer’s restrictive covenant on an employee. Depending on the contract, employees may be unable to take particular jobs with some employers in the same business line as their own company. The agreement may also restrict them from starting a business. It is in effect for a certain amount of time and may apply in a particular geographic area. This agreement is a binding legal contract between the employer and the employee.
Currently, the rule is that employers may require employees to sign non-compete agreements, which are subject to limitations. A non-compete is enforceable under Florida law, depending on the actual agreement. An employer may have the legal right to damages from an employee for breaching the contract, or they can get a judge to order the former worker to stop the conduct that violates the non-compete. An employer must take prompt legal action to enforce the non-compete agreement to protect themselves fully.
Why Employers Ask for Non-Compete Agreements
Employers may have reasons to ask employees to sign non-compete agreements that include:
- Preserving their position vis a vis their competitors
- Protecting themselves from losing client relationships if an employee leaves the company
- Safeguarding their sensitive corporate information
- Protecting their investment in training employees
Employers are often trying to find a way to reduce employee turnover. Recruiting and training new employees can become very expensive for a company, and the employer wants to find a way to keep workers from leaving (although the company’s justification for the non-compete must include a legitimate business reason). Maintaining low costs may not provide the necessary reason for a court to enforce a non-compete agreement.
Non-compete agreements may apply to far more employees than you think. While you may believe that non-compete contracts only concern people like senior management or those with access to critical information, many lower-paid employees must also sign them. Some states restrict companies from requiring employees to sign a non-compete when they earn below a certain amount, but Florida has no such limitations.
What Must the Employer Give the Employee for an Agreement?
The employer must give the employee something in exchange for their signature on a non-compete agreement; there must be consideration on both sides of an agreement to enforce it. The employee cannot make a gratuitous promise in exchange for nothing because it will not hold up in court.
Usually, an employer can seek a signed non-compete agreement when they promote an employee or increase their salary. They may also need a non-compete when they invest money and provide an employee with specialized training for a job. However, there are times when an employer can demand a non-compete as a condition of employment. For example, the employee may have access to confidential corporate information as part of their job, and the company wants to ensure that they cannot use this knowledge if the employee takes a job elsewhere.
How Florida Law Views Non-Compete Agreements
Florida has a specific law that governs restraints on trade, and non-competes fall under this classification. The court will not enforce any restriction on trade unless the person seeking enforcement can prove that one or more legitimate business interests necessitated the non-compete in the first place. It is null and void unless the person can show that one of these interests exists.
Under Florida law, legitimate business interests can include:
- Trade secrets
- Valuable confidential business or professional information that otherwise does not qualify as trade secrets.
- Significant relationships with specific prospective or existing customers, patients, or clients
- Customer, patient, or client goodwill
- Extraordinary or specialized training
Employers Must Limit and Tailor Non-Compete Agreements
An employer cannot simply introduce any restriction that it wants on the employee in a non-compete agreement. Courts will also consider someone’s ability to earn a living if they leave their employer. A judge may balance the employer’s business interests with the employee’s right to support themselves. Never underestimate the importance that a judge may place on the employee’s ability to earn a livelihood.
Accordingly, a non-compete agreement must be reasonable. Here, factors that determine whether an agreement is reasonable include:
- Time: If the non-compete agreement is supposed to last for a long time (such as several years or permanently), the court may consider it unreasonable. Florida law specifically states that a non-compete agreement lasting six months or less is reasonable, while one lasting longer than two years is unreasonable.
- Scope: Non-compete agreements can apply to working for some named competitors, but the agreement cannot forbid the employee from working in an entire industry.
- Geographic distance: A non-compete agreement cannot apply to an area that is too broad.
There is no hard and fast rule about what provisions of a non-compete agreement are unreasonable. Everything depends on the facts and circumstances of a situation, which the judge will interpret after hearing evidence.
The Burden of Proof May Shift in a Non-Compete Agreement Lawsuit
The first burden of proof is on the person seeking to enforce the non-compete agreement. Once they can prove a legitimate business interest in the agreement, the burden will shift to the person seeking to invalidate the contract. They must show that it is “overbroad, overlong, or otherwise not reasonably necessary to protect the established legitimate business interest or interests” (Florida Statutes 542.335). If they can prove that the agreement meets this description, a court can enforce it only to the extent necessary to protect the employer’s interests.
How Employers Should Draft Non-Compete Agreements
Although companies want as much protection as possible when employees sign a non-compete agreement, they must also be careful if they want it to remain enforceable in court. If the contract goes too far, the court may strike it down entirely or enforce only a limited part.
Therefore, you must carefully tailor the non-compete agreement to the terms of the situation and try not to reach too far. You should have an experienced business law attorney draft a non-compete agreement to ensure that it complies with Florida law and is there to protect the company when necessary.
What Happens When Someone Violates a Non-Compete Agreement?
A non-compete agreement, provided it meets the requirement, is a legally binding document for the employee and employer. If a business believes an employee is violating the agreement, it can file a lawsuit for breach of contract. The employer may first send a cease-and-desist letter to the employee, directing them to stop any conduct that violates the non-compete agreement. If you need to draft this letter, hire a business law attorney.
Many employees will not follow the direction in the cease-and-desist letter, believing that they can fight the non-compete agreement in court and win. Then, it is up to the business to take further legal action to enforce the contract. The employee may also take preemptive legal action to fight the non-compete agreement. For example, the employee can seek a declaratory judgment from a court that the agreement is invalid and unenforceable.
An employee may defend against a non-compete lawsuit by arguing the following:
- The restrictions contained in the agreement are overly broad.
- The employer did not have a legitimate business interest in requiring the employee to sign a non-compete agreement.
- There was no consideration in exchange for the employee’s agreement.
- The employer may have breached the non-compete agreement first, which rendered the restrictions unenforceable.
Remedies in a Non-Compete Violation Case
The non-compete agreement may state liquidated damages that the employee must pay if they violate it. If the liquidated damages seem punitive in that they are out of line with the actual harm suffered by the employer, this contract clause is not valid.
The employer may otherwise see damages from the employee based on the harm they have suffered. Damages in a breached non-compete agreement case include:
- Actual costs that the employer suffered from the breach, including having to invest extra money in securing their systems
- Lost profits that they would have earned had the employee not breached the agreement
- Attorney’s fees
- Punitive damages from the employee if the breach of the agreement was severe
In many cases, the employer is trying to stop wrongful practices as they are occurring, and it is not uncommon for them to seek an injunction from the court to halt any violation of the non-compete agreement. Although it is rare for judges to grant injunctive relief, they may do so when the issue is that the harm needs to end. Thus, a judge may order both damages and an injunction.
Conversely, employees may sue for economic losses if they were subject to an overbroad non-compete agreement that cost them opportunities and money. Thus, employers must remain vigilant when drafting these agreements because they may have legal consequences.
The Future of Non-Compete Agreements in Florida
The Federal Trade Commission recently issued a final rule banning employers from using non-compete agreements in nearly all circumstances. Further, the FTC’s rule intended to declare existing non-compete contracts null and void. Although the rule took effect in August 2024, there were immediate legal challenges. A federal judge issued an injunction against the rule, keeping it from going into effect. Recently, the Trump Administration announced that it will no longer keep litigating the appeal of the injunction, permanently blocking the FTC’s rule.
Although some commissioners on the FTC continue to believe in the need for a rule, the recent FTC regulations appear to no longer be an issue. Accordingly, companies can still require employees to sign non-compete agreements subject to the existing framework that has always been in place under Florida.
Hire an Attorney to Help You Draft a Non-Compete Agreement
If you want to require employees to sign a non-compete agreement, it is vital to consult with a qualified attorney who can help you draft a contract that complies with Florida law. An experienced attorney can advise you on what constitutes a reasonable geographic scope and duration for the agreement and identify the legitimate business interests you can protect. Working with a lawyer focused in Business Law ensures that your non-compete agreement is enforceable and protects your business.
While requiring employees to sign a non-compete agreement in Florida is possible, it is essential to understand and comply with the state’s specific requirements. Consulting with a knowledgeable Business lawyer can ensure you know Florida’s non-compete laws and that your agreement is enforceable. Protecting your business interests while respecting your employees’ rights is a delicate balance, and having legal guidance is key to achieving this.