Non-Competition, Non-Use and Non-Disclosure Agreements
Non-compete agreements are used as incentives to retain employees, by restricting a departing employee from immediately working for a competing business. As well, in Florida and elsewhere, non-competition, non-use and non-disclosure agreements preserve confidential business information, such as trade secrets, clients lists, specialized training and business plans, from being disclosed to a new employer by the departing employee.
Interpreting, enforcing or escaping Non-Competition, Non-Use and Non-Disclosure Agreements can be problematic, not only for employer and employee but also for the Courts. . For example, the date of termination of an employment relationship may not be as relevant as the date the non-compete agreement was signed. Choice of law concerns also arise, and courts have determined that the enforceability of a covenant not to compete may be controlled by the law at the time the agreement took effect and should be interpreted according to the law of the state where the employer conducts business or where the employee executed the agreement, not where the company has its principal place of business.
State laws also vary as to the appropriate length and breadth of such agreements, but they generally agree that the agreements cannot be overly-long in time or overly-bread in geographic scope. In Florida, Non-Competition, Non-Use and Non-Disclosure Agreements are enforceable as long as the following so long as:
-the duration of the restriction is reasonable. Six months to a year is often considered reasonable, while a two-year non-compete agreement is likely to be viewed as unreasonable.
– the geographic territory covered by the agreement must be reasonable and related to a legitimate company interest. For clarity, a one or two county-wide restriction is more accepted than a restriction covering “the entire United States” or “the World.”
-the company wishing to enforce the agreement must have a legitimate interest in
enforcing it, and must not simply be overreaching or enforcing the agreement without good reason. By way of example, an ecommerce-based company might have a more legitimate basis for a broader geographic restriction than a locally-based bricks-and-mortar business.
Non-Disclosure Clauses and Non-Use Clauses and Remedies.
Effective Non-Compete Agreements may contain internal contain Non-Disclosure clauses, designed to restrict the spread of confidential business information and reduce the revelation of legitimate business interests such as trade secrets and proprietary information
Non-Use clauses may also be found within Non-Compete Agreements. Those Non-Use clauses will prohibit use of certain types of information obtained by the employee while employed from being used by the departing employee in another business, whether or not the business competes with the past employer.
Remedies available to employers for breach of such agreements and clauses include equitable relief, such as an injunction or disgorgement of profits improperly gained, or monetary relief such as damages for wrongful disclosure or tortious interference with business relations or with prospective economic relations. Punitive awards against the breaching party, consisting of attorneys’ fees and costs, are possible. Negotiating or Escaping Non-Compete, Non-Disclosure or Non-Use Agreements and Remedies.
If you are seeking to escape this type of agreement or clause, whether in Florida or elsewhere, remember that it is the burden upon the employer, and not the employee, to establish that the agreement or clause is reasonable in duration and scope and based upon legitimate business interests. Often, what seems an inescapable room instead yields an open door when subjected to a deeper analysis.
Remedies available to employees include injunctions preventing enforcement of such agreements and clauses, partial reformation of employment contracts to remove such clauses, or complete rescission of such agreements.
If you are commencing employment and negotiating these types of employment restrictions, it is preferable to review these restrictions with your own attorney before agreeing to or proposing them. When faced with these questions, your first step should be to consult a qualified business law attorney or employment law attorney familiar with Non-Compete, Non-Disclosure or Non-Use Agreements.