Exceptional Legal Counsel

Should you use non-compete agreements in your business?

On Behalf of | Jan 27, 2023 | Firm News

If you want to ensure that your business remains competitive far into the future, then you need to look for every advantage that you can obtain. While this includes securing top talent, engaging in effective marketing practices, and creating the business infrastructure that you need to effectively reach your consumers, you also have to consider how you can protect important business operations from your competitors.

One effective way to do this is to utilize non-compete agreements. Here, you restrict a former employee’s ability to work for a competitor within a specified geographic region and for a specified period. These agreements are typically negotiated during the course of employment.

Generally speaking, the law is oftentimes hesitant to recognize non-compete agreements as legally valid because of concerns about restrictions on an individual’s freedom to seek employment. Several states have outlawed non-compete agreements and several more have limited their use. The Federal Trade Commission recently proposed a rule that would outlaw the use of non-compete agreements in many situations nationwide.

However, Florida law currently allows for the use of non-compete agreements. In order for them to be deemed binding, though, you have to ensure that the terms of the agreement are reasonable and that the agreement seeks to protect a legitimate business interest.

How is reasonableness determined?

A reasonableness determination applies to all aspects of a non-compete agreement. Therefore, if the matter ends up going to court, a judge will assess whether the restriction in the activities, geographical scope, and time are reasonable.

When it comes to the activities that are restricted, you should consider limiting them to those that the employee carried out for you while under your employ. For example, if the individual in question was your director of marketing, then the non-compete agreement should probably address marketing for a competitor.

When it comes to geographical area, a court is probably going to look at where the employee worked and limit the agreement in scope to that area. That said, you’ll want to make sure that the court is aware of how the other business operates, such as by engaging in online sales, so that you have more room to argue that a more expansive restriction is reasonable.

For a time, a court will consider how long the employee worked for you and the sensitivity of the information that you’re trying to protect, providing greater protection for that information that’s highly sensitive.

What is a legitimate business interest?

If you want your non-compete agreement to be legally valid, you also need to demonstrate how it’s necessary to protect a legitimate business interest. While this may certainly include protecting trade secrets, it can also include protecting any of the following from the competition:

  • Client lists
  • Marketing strategies
  • Specialized training materials
  • Propriety information
  • Confidential business records

When arguing about the legitimacy of your business interest, you’ll want to be as specific as possible and clearly articulate how the impacted information affects your business. Keep in mind, though, that the court is going to consider whether the non-compete places the least amount of restriction on the employee while still providing a reasonable amount of protection to your business interests.

Do you need help with your non-compete agreement issues?

A well-executed non-compete agreement can be extraordinarily valuable to your business. But a poorly negotiated one or one that is too restrictive can leave your business at great risk.

That’s why you need to know what you’re doing during the negotiation and execution phase. You also have to know what to do when you suspect that a non-compete agreement has been violated. This is where an experienced business law attorney like those at our firm may prove helpful.