Second Quarter, 2007
Although Florida is regarded as a right-to-work state, non-competition agreements are permissible in certain circumstances. The Florida Legislature has declared that non-competition agreements are enforceable only to the extent “reasonably necessary” to protect a “legitimate business interest” of the employer. The key, therefore, to analyzing the enforceability of any non-competition agreement is whether it is in furtherance of a legitimate business interest of the employer.
Generally, a legitimate business interest is an “asset” of the employer that is utilized by the employee during the employment relationship. The employee should not, as a matter of fairness, be entitled to take the employer’s assets for his/her own benefit and the benefit of his/her new employer. The applicable statute provides a non-exclusive list of legitimate business interests: (a) trade secrets; (b) substantial relationships with specific prospective or existing customers or patients; (c) good will associated with intellectual property, a specific geographic location or specific trade area; or (d) specialized training. By far, the most common legitimate business interest asserted by employers is with respect to customers, patients and clients. The employer can only protect relationships that are both “specific” and “substantial”. An employer cannot, generally, protect all prospective customers in a geographic region or in an industry.
Even where an employer demonstrates a legitimate business interest, traditional defenses to the enforcement of non-competition agreements are available to the employee, including, unethical or illegal conduct by the employer, prior breach of the employment agreement by the employer, waiver or fraud. Florida law does not, however, allow an employee to assert that enforcement of a non-competition agreement will deprive him/her of the ability to earn a living. A non-competition agreement is enforceable only for a reasonable period of time, as necessary, to protect the employer’s legitimate business interests. The Legislature has provided guidance with respect to what is presumed reasonable under certain recurring circumstances: (a) six (6) months up to two (2) years for a former employee; and (b) three (3) years up to seven (7) years for the seller of a business.
In summary, Courts interpreting and enforcing non-competition agreements in Florida must weigh the employer’s right to protect its investment in its “assets” against the employee’s right to work. The analysis, which is factually and legally case specific, will determine the scope, if any, of the enforceability of the non-competition agreement.
