As discussed last week in this blog, Florida law allows employers and other entities to impose certain restrictive covenants in their dealings with others. In order to be enforced, the restrictive covenant must be supported by a legitimate business interest, such as trade secret or confidential business information, relationships with customers or goodwill.
In addition to requiring a legitimate business interest, the restraint of trade statute establishes certain presumptions that apply in determining whether a restrictive covenant is reasonable. For instance, in the case of a restrictive covenant that an employer seeks to enforce against a former employee or independent contractor, there is a presumption that any restraint six months or less in duration is reasonable and any restraint two years or more is unreasonable.
These time periods vary depending on the person seeking to enforce the covenant. Unlike a restrictive covenant of an employer, a restrictive covenant that is sought to be enforced against a former distributor, dealer or franchisee is presumed to be reasonable if it is one year or less in duration and unreasonable if it is more than three years long.
A restraint three years or less is reasonable when it is sought to be enforced against a seller of business assets or shares, while a restraint of more than seven years is presumed to be unreasonable. Finally, a restraint of five years or less is presumed reasonable on restrictive covenants dealing with trade secrets, while covenants of 10 years or more in these situations are presumed unreasonable.
Ultimately, these time periods are not absolute, as the presumptions might be overcome in certain cases. However, they are highly relevant to determining liability in disputes involving the enforceability of restrictive covenants.
Source: Florida Legislature, “Valid restraints of trade or commerce,” accessed on Sept. 10, 2016