What Every Employee Should Know About Covenants Not to Compete

By: Randy Rosenblum

A covenant not to compete, also known as a restrictive covenant, is an agreement that restricts the ability of a person (generally an employee) to work in a particular field for a certain period of time and within a certain geographic area. Contrary to the belief of many employees, such agreements are enforceable and are even encouraged. Florida Statute 542.335 governs the enforceability of covenants not to compete entered into after July 1, 1996. Such agreements must be in writing and signed by the former employee if an employer desires to enforce it against the former employee. Fla. Stat. 542.335(1)(a).

A covenant not to compete will be enforced if it is reasonable in time, area and line of business. Regarding former employees, restraints of six (6) months or less are presumptively reasonable whereas restraints more than two (2) years in duration are presumptively unreasonable. Fla. Stat. 542.335(1)(d)(1).

The determination of whether such an agreement is enforceable as to its geographical restrictions will usually depend on the locations in which the business operates. For example, if a particular employer conducts business in every state, then a nationwide restriction may be upheld. On the other hand, if a particular employer only conducts business in one particular county or city, then a geographic restriction greater than that county or city will not likely be upheld.

Of course, an employer cannot prohibit a former employee from working in a field in which the employer itself does not do business. Before agreeing to sign a covenant not to compete, it is wise to have the employer define the nature of the business so that no dispute arises later about the scope of the business conducted by the employer.

In addition to being reasonable in time, area and line of business, restrictive covenants will not be enforced unless the employer proves the existence of one or more legitimate business interests justifying the restrictive covenant and that the restraints are reasonably necessary to protect such legitimate business interests. Fla. Stat. 542.335(1)(b)-(c). Examples of legitimate business interests include trade secrets, confidential business information and substantial relationships with prospective or existing customers, patients or clients. Fla. Stat. 542.335(1)(b)(1)-(3).

It is important for employees to understand that even if a covenant not to compete is too long in time or overbroad in scope, those facts do not necessarily mean that the restraints will not be enforced in some fashion. Indeed, Florida law specifically provides that when the restraints are overbroad, overlong or not reasonably necessary, the court shall modify such restraints to the extent necessary to protect the employer's interests. Fla. Stat. 542.335(1)(c).

There are, however, defenses to the enforcement of covenants not to compete other than those already discussed. For example, if the employer no longer continues in business in the area or line of business that is the subject of the action, then the employer may not be entitled to enforce the restraint. Fla. Stat. 542.335(1)(g)(2). The court can consider any legal or equitable defense available to the employee. Fla. Stat. 542.335(g)(3). The one defense that a court cannot consider is the economic or other hardship that might be caused to the employee by enforcement of the covenant not to compete. Fla. Stat. 542.335(1)(g)(1). Other defenses that might be available to employees include: a) the fact that the employer has not enforced such restrictions against other employees; and b) the fact that the employer has breached other material terms of the employment contract between the employee and the employer.

If an employer successfully enforces a covenant not to compete, the employer is entitled to an injunction prohibiting the employee from continuing to work in violation of the restraint and may be entitled to monetary damages or other relief depending on the language of the agreement. Also, even if the agreement does not so specify, the prevailing party in any action to enforce a covenant not to compete may be entitled to recoup his or her attorney's fees and costs. Fla. Stat. 542.335(1)(j)-(k).

If an employee has any questions about whether to sign a particular covenant not to compete or what to do if the employee is being sued by the employer to enforce such an agreement, the employee should immediately consult with an attorney so that the employee may be fully advised of his or her rights under Florida law.