Legal Issues Arising from Covenants and Agreements Not to Compete

A covenant not to compete refers to a clause in a contract where an employee of a company agrees not to pursue a similar profession or trade in competition with a current or former employer. Also referred to as non-compete clauses, these covenants can be difficult to enforce, especially if an employee alleges they were coerced into signing an agreement containing these restrictions. Legal issues generally arise in this regard when an employee either leaves or is terminated from one position and then goes to work for a competing employer, or seeks business from his or her former employer’s customers. Litigating non-compete clause violations can be time consuming and very costly for all parties involved, especially the aggrieved employer. Moreover, these lawsuits are often complex, multi-faceted and may include claims raised by several different parties.

Florida law provides that non-compete clauses and agreements can be enforced pursuant to the following legitimate business reasons:

• To protect valuable trade secrets
• To maintain confidential business information
• To preserve relationships with prospective or existing customers
• To defend goodwill associated with an ongoing business or professional practice by way of a trademark, geographic location or marketing/trade area
• To maximize corporate investments in specialized employee training

Overall, a non-compete clause unsupported by any of the above legitimate business interests will be rendered void and unenforceable. Although many employers require employees to sign non-compete agreements pursuant to the aforementioned interests, lawsuits nonetheless ensue. Those that typically prevail in lawsuits arising from non-compete clauses and agreements usually do so under the following circumstances:

• The employer breaches the employment contract
• The employer has no legitimate interest to enforce the agreement
• The employer is overreaching legitimate business interests
• The agreement restricts competition for an unreasonable amount of time
• Alleged confidential information has been disclosed to the public or is readily available to them

Whatever the situation presents, it is crucial to consult with an attorney who has extensive experience representing business clients in many different types of legal matters, including issues arising from non-compete clauses and agreements.