Restricting Employees’ Ability To Become Competitors After Leaving Your Business
A high rate of employee turnover can be a serious concern for any business, especially if the employees leaving the business are senior level employees with access to important trade secrets or exclusive customer lists. A small business owner looking for a way to protect his or her business from damage that may be caused by departing employees, especially those who leave on less than amicable terms, can do so through agreements such as non-disclosure and non-compete agreements. We have briefly discussed non-disclosure agreements before, and so we will take a look at non-compete agreements or clauses.
The purpose of a non-compete clause in an employment agreement is to limit the kind of work a departing employee can engage in after leaving your business. These agreements usually seek to limit a departing employee’s ability to engage in the same business as you are in or to stop the employee from poaching your clients in the same geographic area. Most non-compete clauses in Florida are governed by Florida law unless the agreement contains an alternative choice of law clause. Under Florida law, non-compete clauses or restraints of trade or commerce are valid if the party seeking to enforce such an agreement can show certain factors have been met.
Non-compete clauses in Florida are generally enforceable as long as the restrictions contained therein are reasonable in time, area, and line of business. A non-compete clause is also required to be in writing and signed by the employee it is sought to be enforced against. When seeking to enforce a non-compete clause, you would also be required to show that the clause serves to protect a legitimate business interest. Some of the examples of legitimate business interests provided in the statute include;
- Trade secrets,
- Valuable confidential business or professional information that is not considered trade secrets,
- Significant business relationships with specific prospective or existing customers, patients, or clients,
- Customer, patient, or client goodwill, and
- Extraordinary or specialized training.
In determining the reasonableness of restricting a departing employee’s ability to earn a living in the same field or the same geographic area for a period of time, a court is not allowed to consider the individual economic hardship that the employee faces. However, if your business no longer operates in the field or location that the restriction applies to, the departing employee may use this as a defense. It is also important to note that covenants that are under six months are almost always considered reasonable while those over two years would be considered unreasonable for a departing employee.
In most cases, if an employee violates a non-compete clause the former employer should seek an injunction in addition to or instead of monetary damages. This is because an injunction would keep the former employee from potentially causing any more harm to the business that would not be remedied through monetary damages.
Contact An Experienced Business Attorney
If you are a small business owner considering hiring employees, consult an experienced business law attorney to ensure that you comply with the legal requirements and protect your business. To find out more about how a business attorney can help your business, contact a North Miami business law attorney at the Charlip Law Group L.C. for a consultation today.