Are Non-Competes Really Enforceable?
By: Matt McLauchlin
It never ceases to astound me when I get this question. And, I get it all the time. Really. Many otherwise sophisticated business people suffer under a misimpression that “they heard” that non-compete agreements “aren’t worth the paper they were written on.” This misimpression may have its roots in the fact that society’s level of acceptance of non-competition agreements has ebbed and flowed over time, and the laws on the enforceability of non-competes have not always been favorable. Also, the enforceability of non-compete agreements varies from state to state, and some jurisdictions apply more intense rigor and scrutiny to non-compete agreements.
But, in Florida, where I practice, the answer to the question, “Is a non-compete really enforceable?” is an emphatic, “Yes.” Florida has a statute, Section 542.335, that expressly allows non-compete agreements and provides a set of guidelines for their enforcement. And, unlike many other states, Florida will not strike down an otherwise valid non-compete agreement if the drafter happens to draft the geographic scope of the restriction too broadly or makes the restriction last for too long a period of time. In other words, if necessary, the Florida courts will work to help fashion an enforceable non-compete agreement. And Section 542.335 precludes a court from considering some of the typical employee defenses. So, yes, non-competes in Florida are enforceable and are routinely enforced by Florida’s courts.
What is the upshot?
If you are an employee and are presented with a non-compete agreement governed by Florida law to sign, make sure you review it with an attorney and decide whether you can live with its restrictions if you later on decide to leave your employer’s employment. Because, the chances are, it will be enforceable.
If you are an employer and have employee relationships, substantial customer relationships, confidential business information, or other intellectual property or trade secrets you want to protect from being taken from you by departing employees, you need to have your employees sign a non-compete. If you don’t protect yourself with a proper non-compete agreement, your employees are free to leave, move next door, open up the same type business and solicit and take your best customers. As one Florida court succinctly put it:
“… competition for business is to be expected from former employees who are not bound by a non-compete contract.”
Langford v. Rotech Oxygen & Medical Equipment, Inc., 541 So.2d 1267, 1268 (Fla. 5th DCA 1989) (emphasis added).
If you are an employer, call an attorney to assist you in drafting an enforceable non-compete agreement. If you are an employee, have an attorney review and analyze your agreement and perhaps help make modifications or limitations to any non-compete agreement you are asked to sign.
What does it mean to “Solicit” a Former Employer’s Customers?
By: Matt McLauchlin
In suits to enforce non-solicitation agreements, departing employees often argue they did not “solicit” the business of their former employers’ customers. They often claim that the customers themselves contacted them and voluntarily switched their business over of their own accord. Therefore, they contend, they did not “solicit” the customers and are not in violation of their non-solicitation covenants.
While this argument has some surface appeal, it often ultimately fails if the employee has taken any proactive steps, as is usually the case, to follow up with the customers to take on their business after being contacted by the customer. A leading Florida case on this issue is Scarbrough v. Liberty National Life Insurance Co., 872 So.2d 283, 285 (Fla. 1st DCA 2004). There, the First District Court of Appeal discussed the situation where former clients initiate contacts with employees at their new place of business. The court explained that “solicitation” can include a transaction in which the employee was proactive, regardless of whether the customer or employee initiated the transaction.
The Fifth District Court of Appeals in Envtl. Servs., Inc. v. Carter, 9 So.3d 1258 (Fla. 5th DCA 2009), likewise recognized that a “solicitation” by an employee can exist in violation of a non-compete agreement “regardless of whether the customer or employee initiated the transaction.” Envtl. Servs., 9 So. 3d at 1266.
Given the arguments that can arise over the term “solicitation,” the practitioner drafting a non-solicitation provision should include other terms in addition to “solicit.” To affirmatively preclude any possible debate over whether the employee engaged in improper “solicitation,” a customer-focused restrictive covenant should go farther and include other specific restrictions such as “provide services for,” “accept the business of,” “take,” or “procure the business of” the former employer’s customers. In this way, there can be no argument as to whether the employee’s contacts with the customers were proactive enough to constitute an improper solicitation. Such additional restrictions will be enforced under a proper factual foundation. See Joseph U. Moore, Inc. v. Neu, 500 So.2d 561 (Fla. 2d DCA 1986) (upholding covenant that proscribed soliciting and procuring of business of former employer’s customers); Joseph U. Moore, Inc. v. Howard, 534 So.2d 935 (Fla. 2d DCA 1988) (upholding covenant that proscribed soliciting or accepting former customers); Sabina v. Dahlia Corp., 650 So.2d 96 (Fla. 2d DCA 1995)(rejecting injunction which prohibited “‘procuring’ of insurance” as it went “beyond enforcing the plain language of the covenant which proscribes ‘calling upon or soliciting'” and stating that a broader covenant precluding the procuring of insurance would have been enforceable had it been drafted in that manner).
For additional information, please contact Matt McLauchlin.
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