STORY TOOLS

• E-mail story
• Comments
• iPod friendly
• Printer friendly

More It's the Law

• It's the Law: Unwanted developments
• It’s the Law: Do I have to pay the mortgage of a property I just inherited?
• It’s the Law: Are you dealing one party or two?

Share and Enjoy [?]

Q: My employer required that I sign an agreement not to compete with the company if my employment relationship is terminated. I did not want to sign it, but it was required for me to keep my job. A competing company has offered me a much better job, but it means I will be competing with my current employer. Is the non-competition agreement enforceable?

A: Your employment contract contains what is generally known as a covenant not to compete. Section 542.18, Florida Statutes, provides that every contract, combination, or conspiracy in restraint of trade or commerce in this State is unlawful. Unfortunately for you, Section 542.335, Florida Statutes, carves out a number of exceptions to the general rule, including one for covenants not to compete.

At common law, agreements restraining trade or commerce were unenforceable as contrary to public policy. The restriction against non-competition arose in England in relation to the apprenticeship requirement to practice a trade or profession. Prohibiting a person from working under supervision of someone other than his original employer would leave that person a virtual slave. Over time, the rules of apprenticeship became obsolete and limitations on competition special circumstances were deemed appropriate.

Florida continued to observe the common law prohibition against contracts in restraint of trade until 1953. At that time, the legislature adopted a law which confirmed contracts in restraint of trade were invalid, but included limited exception. Exceptions included persons selling goodwill of a business and agreements under which employees agreed with their employer to refrain from engaging in a similar business and from soliciting old customers of the employer within a reasonably limited time and area.

In 1996, the legislature adopted a much broader and detailed statute addressing covenants not to compete. The statutes specifically state that contracts prohibiting competition unenforceable, as long as they are reasonable in time, area, and line of business. Prior to the new law, some Florida courts had considered hardship on an employee or former employee as part of the criteria for enforcing or not enforcing the covenant. When the employee quit working for the employer, the court generally did not investigate further. But, where the employee was wrongfully terminated or terminated without cause, hardship was considered. The new law prohibits courts from considering hardship that might be caused to the person against whom enforcement is sought.

The statute has a fairly comprehensive set of criteria for consideration by the court in enforcement actions. Restrictive covenants must be in writing and signed by the person against whom enforcement is sought. The person seeking enforcement must show one or more legitimate business interests that justify the covenant. The statute lists a number of legitimate business interests, including trade secrets, customer relationships, extraordinary or specialized training, and customer, patient, or client goodwill.

A person attempting to enforce a covenant not to compete must prove that the restriction is reasonably necessary to protect the legitimate business interest justifying the restriction. If the court finds the restriction too broad, it’s required to modify the restriction so that it is limited to scope reasonably needed to protect the legitimate business interest.

The statute also establishes time frames for certain restrictions that are presumed reasonable, although the presumption can be overcome by evidence at trial. As pertinent to your case, covenants involving former employees are presumed reasonable if extending six months or less, and unreasonable if extending two years or more.

The court is to consider all legal and equitable defenses, effect of enforcement upon the public health, safety and welfare, and whether the person seeking enforcement is still in business in the area or line of business involving the restriction.

Courts can enforce covenants not to compete by any appropriate and effective remedy. This can include temporary and permanent injunctions, as the violation of an enforceable covenant creates a presumption of irreparable injury to the person seeking enforcement. No temporary injunction may be awarded unless the person seeking a temporary injunction posts a bond in an amount set by the court. The bond is used to pay damages to the other party in the event the temporary injunction is later shown to have been unwarranted.

In most litigation, attorney’s fees can only be awarded if they are provided by contract or a specific statute. By statute, the prevailing party in an action seeking enforcement of a covenant not to compete may be awarded attorney’s fees and costs by the court.

Although the 1996 statute is comprehensive, these cases still turn on the facts of each situation. This makes good legal counsel extremely important in this area. I suggest you retain an experienced attorney to review the facts of your particular situation and soon as possible.

---

William G. Morris is a lawyer with offices at 247 N. Collier Blvd., Marco Island. The column is not intended to be legal advice for specific circumstances. General questions can be sent by e-mail to wgmorrislaw@earthlink.net or by fax to (239) 642-0722. Read other columns at http://www.wgmorris.com.