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How Businesses Can Effectively Cope With New Non-Compete Clauses

The recent passing of a Massachusetts law addressing non-compete agreements has employers across the country taking notice. This new law, which has been called "foolish" and "counterproductive" by analysts, grants employees bound by non-compete agreements some bold new rights.

A Look Inside the New Law

The new law grants employees the right to receive 50 percent of their previous pay during the entire time they're bound by a non-compete agreement. These rights apply not only to employees who have been laid off, but also to those who have chosen to quit.

Under the new law, employers are prohibited from requiring almost all hourly employees to be bound by a non-compete agreement. This includes highly specialized employees who may have access to their employer's proprietary company secrets. This new rule creates a disincentive for employers to provide hourly employees with training, putting those employees at a disadvantage and making it more difficult to promote from within.

A third point of this law which has created concern prohibits employers from enforcing non-compete contracts if the employee was terminated without "cause." This creates a situation where employers may have to officially accuse an employee of wrongdoing, thereby potentially creating further legal issues.

Concerns for Florida Employers

The new Massachusetts law has no current impact on Florida employers, but it does raise some concern that our state could eventually modify its laws in a way that makes it more difficult to protect your information with non-compete agreements.

As it stands today, Florida's stance on non-compete clauses is strongly in favor of the employer, giving most of them a strong leg to stand on when it comes to enforceability. In the state of Florida, non-compete agreements must be designed to protect a "legitimate business interest." This includes, but is not limited to:

  • Trade secrets

  • Valuable confidential business information

  • Important relationships with customers, prospects or vendors

  • Client goodwill in relation to a specific geographic area, special training, marketing, or business practices

Florida is an "at will" employment state, meaning employees can be terminated at any time without cause. The reason for termination has no impact on the enforceability of your non-compete agreement and there is no provision requiring ongoing pay or restitution of any kind.

Terminated employees fighting a non-compete agreement in Florida are most likely to argue that the information being protected is not part of a legitimate business interest, that the contract covers an excessive geographical area, or that it extends for an unreasonable period of time.

Ensuring Enforceability of Your Non-Compete Agreements

Florida employers concerned about protecting their information should not be complacent. Your best bet is to take the time to ensure your non-compete agreements are enforceable before they land in the court systems. If you have employees in multiple states, you'll need to understand the laws in that state, as the enforceability of a contract is often governed by where an employee works, rather than where the company is headquartered.

It's often best to add non-compete agreements only for employees who truly need them and to tailor each agreement for that specific position. Work with a qualified attorney to ensure that the geographic region and time period requirements in your agreements don't make it unreasonably difficult for the employee to find other work. Following these tips will help ensure you don't run into any unexpected surprises if the time comes when you need to enforce your non-compete contracts.

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11011 Sheridan Street
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