A Business-Minded Approach To Employment Law

How​ ​A​ ​Startup’s​ ​Legal​ ​Battle​ ​Could Redefine​ ​Tech​ ​Workers’​ ​Rights

On Behalf of | Nov 16, 2017 | Employment Contracts, Employment Disputes |

Contracts that prevent employees from working for competitors after terminating their current employment are commonly known as non-compete agreements. These agreements are common practice for many Florida businesses. They are designed to, among other things, protect your business from unscrupulous employees who may try to share trade secrets and other proprietary information with their new employers.

Although these contracts may be enforceable under Florida law if the employer can demonstrate a legitimate business interest in restricting the former employee, a legal battle involving a startup tech company could redefine the non-compete landscape for Florida employers. Here’s what you need to know.

Florida’s Stance on Non-Compete Contracts

Florida law states that non-compete agreements are enforceable as long as three criteria are met:

  1. The contract must protect a legitimate business interest (as defined by Florida statute)

  2. The non-compete time-period must be considered reasonable (generally no more than two years)

  3. The geographic location covered by the agreement must be considered reasonable (generally limited to locations where or in and around where the business currently operates).

If an agreement is challenged in court, the ruling may be to modify unreasonable portions of the contract rather than voiding it.

The Legal Battle Between Citrix and Egnyte

Tech giant Citrix and the Google-backed startup Egnyte have filed lawsuits against one another, each citing unfair business practices.

The trouble began earlier this year when seven employees left their jobs at the Raleigh, NC location of Citrix and accepted positions with competitor Egnyte, also located in the same city. Each of these employees had signed a non-compete agreement.

On September 22nd, Citrix sent a cease and desist letter to Egnyte. The letter claimed that the employees were in violation of their agreements and therefore must not be allowed to continue their employment. Egnyte responded by filing a lawsuit, asking the courts to provide declaratory relief that would allow the employees to disregard their agreements.

The suit was filed in California, Egnyte’s home state. Citrix responded by filing their own suit, in their home state of Florida. This suit also accused the employees of downloading documents to their personal computers and, on at least one occasion, attempting to log into their accounts after their employment had been terminated.

Potential Outcomes and Implications

Contrary to many other jurisdictions, the state of California enforces pro-employee rules that generally deem non-compete agreements to be unenforceable. Egnyte’s argument is that the agreement in question is too broad and unfairly limits employee’s ability to seek employment in their industry. It’s likely that the courts will agree.

Florida courts, enforcing either Florida or North Carolina law, would generally allow the agreement to be enforced. The question, then, lies in determining which state is the appropriate jurisdiction for the ruling.

The results of these two cases will lay the groundwork for future non-compete disputes. It will also set precedent for the treatment of California-based businesses operating in other parts of the United States.

Some Final Thoughts

Regardless of the outcome of this case, employers should be aware that a non-compete agreement can only go so far in protecting your business. Adding policies and procedures to safeguard your information is standard best practice.

Provide sensitive information only to employees who need it to perform their jobs, and implement protective measures to prevent the downloading and sharing of your critical information. In this case of proprietary information, an ounce of prevention is worth a pound of cure.