Non-Competition Agreements

Certain types of employees (e.g., those involved in the insurance sales industry) as well as parties to the sale of a business typically enter an agreement under which they agree not to compete in the same business for a stated period of time after the relationship with their employer ends or the sale of their business concludes. Often such non-competition clauses are buried in the employment agreement or in a contract for the sale of the business. Absent a specific statute, the courts will generally enforce such covenants to the extent reasonable to protect the buyer’s investment in the goodwill of the business or to protect the employer from a former employee directly competing with it. If it were otherwise the seller could damage or destroy the very thing he sold to the buyer or that the former employee agreed to protect. However, the courts have always looked more favorably on noncompetition agreements made in conjunction with the sale of a business than those made ancillary to an employment agreement. The reason for the more favorable treatment lies not only in the more recognizable nature of the protectable interest, i.e., the goodwill sold, but also in the fact that both parties are generally on a more equal footing in negotiating the agreement.

Florida, section 542.335, Florida Statutes, sets out the black-letter law on “covenants that restrict or prohibit competition.” This statute sets forth the categories of information that may be protected pursuant to a non-compete agreement along with certain guidelines for the reasonable period of restrictions based on the parties’ relationship, burdens of proof for the parties seeking and opposing enforcement and general instructions on how such agreements are to be interpreted by the court. For a non-compete agreement to be worth more than the paper on which it is written, the agreement must focus on what will be required to enforce its terms, both from a practical and a legal standpoint. Although allowed by statute, non-compete agreements in Florida are subject to different standards as to what is considered reasonable, based on the bargaining positions that exists in different business relationships.

The main aim of any Plaintiff who files a lawsuit involving a non-compete agreement is to stop the violator from continuing with the harmful behavior against the business. Therefore, in addition to suing for breach of contract, most Plaintiff typically ask the court to enter a powerful court order called an injunction that prohibits the violator from competing with the business now and in the future. The four elements to establish a temporary injunction are:

1. Likelihood of irreparable harm and non-availability of adequate remedy at law
2. A substantial likelihood of success on the merit
3. The threatened injury to petitioner outweighs possible harm to respondent; and
4. Granting of temporary injunction will not disservice the public interest; in action to enforce non-compete agreement.

If a violator continues with his/her harmful behavior and disobeys the court’s order, he can be held in contempt of court, which may involve paying additional fines or serving jail time. Therefore, the prospect of litigation over the enforceability of a non-compete clause is a serious matter and should never be ignored.

Defendants who have been sued should look to have the court rule that the restraint on competition is unreasonable and therefore not enforceable whenever possible. Whether a non-competition agreement is reasonable often turns on: (1) the general market or commercial field for the business at issue; (2) the specific geographic market for the business; (3) the time period associated with the typical life of a product or service common to the former and subsequent employers; (4) the time required to renew or update any confidential information a former employee received during employment; and (5) the time required to train a new employee. These criteria are usually presented by expert testimony or documentation to the court.

The lesson is clear. Parties who take no action to enforce non-compete agreements may lose their rights to do so forever. Likewise, offending parties who ignore the requests to cease their behavior by the transacting party put themselves at risk of being sued. A qualified Miami business lawyer can stand up for your rights no matter what side of the issue you find yourself on.