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When can restrictive covenants be enforced under Florida law?

On Behalf of | Sep 9, 2016 | Business Torts |

One of the general principles underlying the American economy is the value placed upon free and open competition. While Florida residents enjoy competing in the free market with one another, there are also certain circumstances in which the restraint of trade may be permissible by law.

Florida law allows certain restrictive covenants to be imposed, such as in the employment context where an employer may have a non-compete agreement with its employees. The non-compete agreements may contain different provisions that protect the business’s legitimate business interests, including its trade secrets, confidential business information, relationships with customers, goodwill with customers and clients and specialized training. If employees sign a restrictive covenant with these provisions and later violate the restriction, the business may have a valid cause of action for the violation of non-compete agreements.

Typically, a restrictive covenant has to be supported by a legitimate business interest of a type identified above in order to be enforceable through a breach of contract action. In addition, courts may examine whether the restrictions contained in the agreement are reasonable in time, area and line of business. Once again, if the restrictions are not reasonable, the court may refuse to enforce the agreement.

While employers may find restrictive covenants useful to protect their business interests, restrictive covenants may be used in other relationships outside of the employer-employee relationship. For instance, restrictive covenants may come into play in partnerships or other business relationships like those between a distributor and distributee or franchisor and franchisee. In each of these cases, however, the restrictive covenants must satisfy the legal requirements in order to be held enforceable under Florida law.

Source: Florida Legislature, “Valid restraints of trade or commerce,” accessed on Sept. 3, 2016