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What kinds of non-compete agreements are enforceable?

Miami businesses work hard to compete with others in the market. As discussed last week in this blog, companies want to prevent their competitors from taking away the company’s confidential information and competitive advantage. Often times, companies seek to have their employees sign a non-compete agreement in order to accomplish this goal, which bars employees from working for competitors or otherwise competing in the event the employee leaves the company.

Not all non-compete agreements are designed equally, however. Former employees and employers, as well as third parties, often become involved in contract disputes over the enforceability of non-compete agreements.

Florida law establishes some guidelines in terms of which types of non-compete agreements (sometimes called ‘restrictive covenants’) are valid. Typically, the person seeking to enforce the restrictive covenant has to show it is reasonably necessary to protect a legitimate business interest. The restriction cannot be overbroad, overlong or otherwise not reasonably necessary to protect a legitimate business interest. If it is, the covenant may not be enforced.

Restrictions are often phrased in terms of a specific duration, such as barring an employee from competing for a period of one year after terminating employment. Under the statute, courts are to presume that restraints that are 6 months or less in duration are reasonable. On the other hand, restraints that are more than 2 years in duration are presumed to be unreasonable.

There are other presumptions that apply for other circumstances. For instance, restrictions against a former distributor, dealer, franchisee or licensee are presumed reasonable if they are 1 year or less in duration, while they are presumed unreasonable if they are more than 3 years in duration.

Accordingly, businesses should understand what presumptions apply for the particular restrictive covenant at issue. Businesses should also understand how courts might act in these cases, as the presumptions may not always control.

Source: Florida Legislature, “542.335,” accessed on Jan. 2, 2016

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