In contrast to many other states, the State of Florida has statutes that govern all aspects of covenant not to compete laws. The statutes in Florida are considered to be relatively liberal regarding upholding a covenant not to compete.
United States law, in general, however, typically does not favor restraints on trade and freedom. Some states specifically forbid these types of clauses.
For a covenant not to compete to be considered valid in Florida, several requirements must be met, including:
- Geographical limitation: The covenant not to compete must be reasonable in terms of distance from the employer. Florida laws provide that the area must be where the employer conducts its business.
- Time period: The covenant to compete cannot prohibit an employee from similar work for an unreasonable amount of time. Florida statutes place limitations of less than 6 months to be reasonable and more than 2 years to be unreasonable.
- Additionally, the court has the discretion to determine the reasonableness of time periods between 6 months and 2 years.
- Area of work: The field or area of work must be defined in a reasonably narrow way;
- In addition, a Florida covenant not to compete clause must protect certain legitimate business interests, which may include:
- Relationships with customers
- Confidential information
- Trade secrets
The major difference in Florida’s non-compete laws is that the court is required to blue-line or cross out provisions of overly broad covenants not to compete in order to protect the interests of the employer. In contrast to other states, employers in Florida are entitled to an injunction that prohibits a former employee from working for a competitor, as well as monetary damages and attorney’s fees.
Because of these issues under Florida’s restrictive covenant laws, an employee should exercise caution before signing a covenant not to compete in the state. If an individual has any questions about covenants not to compete in Florida, they should consult with a local Florida attorney.
It is very important to note that, near the end of 2024, a new federal law, the Final Rule, will govern non-compete agreements across the country, including in Florida. The details of this rule and how it will affect current Florida laws will be discussed at the end of the article.
What Is a Covenant Not to Compete?
In general, a covenant not to compete means that employees will not go to work for their employer’s direct competitor when they leave. In some situations, employees will receive compensation for signing the agreement.
Businesses that most commonly include covenants not to compete are those that handle:
- Highly confidential materials
- Client demographic or information databases that employees can access
- Businesses with a direct competitor
- Trade secrets
- Trademarks and copyrights
Examples of common restrictions in covenant not-to-compete agreements may relate to:
- Time frame: After the employee leaves their former employer, the employee must refrain from working for the competitor for a certain period of time.
- This must be specified in the employment contract.
- Type of business: Working in certain industries and businesses that are generally related to that of the employer may be prohibited.
- Location: The employee may not be permitted to work for a competitor within a specified geographic location.
Covenants not to compete may be considered unreasonable when:
- It lasts for too long
- The geographic area that it covers is too large
- The types of business that it covers are too far-reaching
- The employer does not have a legitimate business interest in enforcing the covenant not to compete
What Is an Employment Contract?
Employment contracts are agreements that are formed between employers and employees regarding the employment arrangement that contains terms and provisions governing the employment relationship. One example of this is that an employment contract may provide that the employee will work for their employer for a specific number of hours in exchange for a yearly salary or hourly wage.
Employment contracts may also outline the benefits that will be provided, such as health insurance or paid time off. In order to be considered a valid employment contract, it must state the grounds for termination as well as the amount of notice each party has to provide in order to terminate the contract.
An employment contract may not be used in every employment situation. However, if the employment is not information, it is typically a good idea to have one.
An employment contract does not have to be written in order to be enforceable. However, it is best to have the contract in writing in case a dispute arises between the employer and the employee because the written document can be referred to.
Under Florida employment law, employment contracts become legally binding when specific requirements are met, including:
- Offer and acceptance: One party must make an offer to another party, and that offer must be accepted.
- Consideration: The two parties must agree to exchange something of value. In the context of employment, this typically means that the employer offers monetary value in exchange for the employee’s labor and expertise.
- Legality: The exchange that is defined in the contract must be legally enforceable.
- Capacity: Both parties must be old enough and considered to be mentally fit enough in order to enter into a contract.
Some courts hold that employees must have time to contemplate the terms of the employment contract before signing the job. This means that it is not considered to be good practice for an employer to give the employee the contract on the first day of their job or after they begin working.
Similar to any type of contract, the agreement may not be signed as a result of:
One example of a type of employee who is likely to have a formal written agreement is a sales representative. Their contract may identify key accounts to which they will sell their employer’s products or services and other duties to attend training sessions and sales meetings.
The contract may also outline the salary as well as the commission that the sales representative will be paid, in addition to their sales goals. Once the employment contract has been entered into, it is binding on both the employer and the employee.
This means that if either of the parties fails to perform as promised in the contract, they can be held legally responsible in court.
What Happens if I Break a Non-Compete Agreement?
A party breaches an employment contract if they fail to do what they agreed to do under the contract or if they act in a manner that is prohibited by the contract. One example of this may be if a contract requires an employee to provide a 30-day notice if they plan to terminate their employment.
The employee may leave without providing a 30-day notice. If so, it will be considered to be a breach of contract, and the employee may be required to pay money damages to their employer as a result. Valid employment contracts may be enforced in court even though some contracts will specify a different process for resolving any disputes that are associated with the contract.
A contract may require the parties to participate in arbitration or mediation instead of going to court if one party claims a breach of the contract. If an individual or employer thinks their contract may have been breached, it is important to consult with an employment contract lawyer.
When an individual is reviewing or negotiating their employment contract, it is important to pay attention to the terms and conditions for the resolution of disputes or for claims of breach. Contracts may require that the parties forfeit important rights, for example, the right to a trial by jury.
What Is the Most Recent Law Governing Non-Compete Agreements?
In April 2024, a new law was voted on by the Federal Trade Commission (FTC) that will govern non-compete agreements, called the Non-Compete Clause rule or Final Rule. This new rule will ban the majority of non-compete agreements.
This new rule will not go into effect until 120 days after the publication of the Federal Register, the government publication that includes regulations in documents having general applicability and legal effect. This means that the rule will not likely apply until August 2024 or later.
Once this new rule goes into effect, all employers throughout the country will have to comply with its requirements. It is important that an employer begins preparations now to ensure they will be in compliance with the rule once it goes into effect by consulting with their lawyer or in-house counsel.
Only one exception has been made under this new rule, which is non-compete agreements made with senior executives will still be enforceable after the rule goes into effect. This exception is permitted because they were more likely to have been negotiated between the parties.
Employers will have to give all other types of employees notice that any non-compete agreements they signed will no longer be enforceable. The new requirements of this rule may also require an employer to revise or completely rewrite their current employment agreements.
How Does this Affect State Laws?
The Final Rule will preempt current Florida laws that all the enforcement of non-compete agreements. This is because it is a federal law, which means it applies, even if the state law is in disagreement.
This will have an effect on Florida employers and employees, as any non-compete agreements signed after the Final Rule goes into effect will not be enforceable.
What if the Final Rule Is Challenged in Court?
It is likely that the Final Rule will face legal challenges and undergo case law interpretations. The Final Rule does have a severability clause so that if any provision of the rule is invalidated or unenforceable, the rest of the rule will still be in effect.
The Final Rule may also be completely struck down at a future date. Because there are many different possibilities of what may happen with this rule, Florida employers who currently use non-compete agreements should consult with their legal counsel to ensure they are in compliance with the new rule and the changes it undergoes.
If an employee or employer has a legal issue involving a non-compete agreement, it is important to note that the changes to the rule may have an effect on their case. The parties should prepare for all possible changes so they can make arguments in court to cover all of these possibilities.
In addition, the parties should request that their lawyers update them regularly if any changes are made to the Final Rule throughout 2024 and in the following years. This is especially important in Florida, as changes to the rule may affect the enforceability of non-compete agreements in the state.
Do I Still Need to Know about the Previous Non-Compete Agreement Laws?
It is very important for parties in Florida to be aware of the current laws and how those laws will be affected when the Final Rule goes into effect. When the rule does go into effect, Florida non-compete agreements, except for those with senior executives, will no longer be enforceable.
However, if the rule is invalidated or struck down, the laws will return to the previous Florida state laws. Because of this, it is important to be aware of previous and current laws.
In addition, all employers should be prepared for these possibilities and how it may affect their business practices. For example, employers may want to include non-compete agreements, even if they are not enforceable at the time, in the event that they do become enforceable in the future.
An employer’s lawyer will help draft and edit employment agreements to ensure that they comply with the Final Rule and prepare for the possibilities of changes to the rule.
Do I Need a Lawyer for Help With Florida Law On Covenants not to Compete?
If you are considering signing an employment agreement, it is important to review your contract with a Florida employment contract lawyer. Your lawyer can also help you negotiate the contract’s terms if something is unsatisfactory.
If you are an employer, your lawyer can help you draft legal and valid employment agreements that are enforceable in court. Whether you are an employer or employee, your lawyer will represent you if any disputes arise related to your contract.
