A non-compete agreement is a contract that stops others from stealing your business’s information or engaging in similar conduct to compete against you. This is done by preventing them from working for your competitors, starting their competing businesses, or solicitation of your customers and employees.
For instance, say a former employee obtained a lot of knowledge of your business. Ensuring they sign a non-compete agreement can protect your business interests and prevent employees from the following:
- Working for a competitor (sometimes competitors are explicitly listed in the contract)
- Starting a competing business
- Poaching clients or other resources (such as other colleagues)
- Selling important business data
However, there are standards to follow when ensuring your non-compete is viable in a court of law – let’s dive in.
Set reasonable restraints – In Writing!
First things first, whatever trade or business activity you wish to restrict, make sure it’s in writing. Again, a Non-Compete Agreement MUST BE in writing! Have the parties involved read and sign the document. If you don’t have a signed agreement, you’ll likely be out of luck, as it would be difficult for the court to assist you without an agreement. The court cannot enforce a restrictive covenant unless it is in a writing and signed by the person against whom enforcement is sought.
Under Florida Law, there are three requirements that need to be met in order for the non-compete agreement to be enforceable:
- The non-compete must be reasonable in the length of time, geographic area, and “line of business”
- The agreement MUST be in writing and signed by the person against whom enforcement is sought
- The non-compete must protect one or more “legitimate business interests.”
What is considered a legitimate business interest?
The term “legitimate business interest” includes, but is not limited to:
1. Trade secrets,
2. Valuable confidential business or professional information that otherwise does not qualify as trade secrets.
3. Substantial relationships with specific prospective or existing customers, patients, or clients.
4. Customer, patient, or client goodwill associated with:
a. An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress”;
b. A specific geographic location; or
c. A specific marketing or trade area.
5. Extraordinary or specialized training.
Trade secrets could be anything from a method, formula, technique, pattern, device, or other professional information that’s highly private or holds independent economic value.
To prove that your company’s information is a trade secret, you’ll need to show that it:
- Is not publicly known
- Hasn’t been discovered through reverse engineering
- Is the result of significant time, money, and effort to develop
- Gives your company a competitive advantage
- Is subject to reasonable protection measures (such as non-disclosure agreements)
If you think your company’s information meets these criteria, then you can take steps to protect it as a trade secret.
Customer lists in Florida may be seen as trade secrets and intellectual property if they are commercially beneficial, have private information, and the company is guarding it. If any of these conditions aren’t met, then the customer list isn’t considered intellectual property.
Additionally, trade secrets are protected under the Federal Defend Trade Secrets Act, which gives companies the ability to file a lawsuit in federal court. However, this only applies if the secret is stolen across state lines.
Is there a way out of a non-compete?
You may be wondering how to get out of a non-compete agreement. Depending on your relationship with the other party, it could be as simple as asking them. If that doesn’t work, you might want to read our blog about settlement agreements—money almost always talks.
If you really love your previous field, are not prepared to buy out, and the non-compete meets the legal boundaries already discussed, it might be time to take a walk on some new grass.
You can move to a place outside the restricted location without violating the agreement. But don’t forget to check where your previous company spreads its roots. If they have a franchise or sister in the region you are eyeing up, and you can’t find any untouched lands, it’s probably best to just wait out the terms of your non-compete.
What happens if I break a non-compete agreement?
Contract breaches take many forms, and so do the compensation or damages that follow.
The non-compete will likely outline the cost of particular restricted actions within the written agreement. And if they take you to court, you might have even higher charges presented to you, depending on the economic losses that came out of the breach. Loss of business, employees, and reputation damage are financial losses and viable reasons to bring the case to court.
A court could order you to pay:
- Restitution for any losses suffered by the company
- Compensatory damages
- Punitive damages (in cases of malicious breach)
- The company’s attorney fees and court costs
Exercise great caution before entering a non-compete agreement and fully assess the risk and reward of the deal—as economic hardships, aka lack of skills for another job type, isn’t a way out of the signed agreement. (so perhaps you may want to revisit that settlement blog).
If you’re looking for some support crafting a non-compete agreement, or are in dire need of escaping one, don’t worry. We’re here to help!
