Now is the time to revisit noncompete agreements, restrictive covenants | Opinion

In today’s knowledge economy, an enterprise’s value is often measured by its intangible assets, including specialized know-how, intellectual property, trade secrets, customer lists, business strategies, and goodwill. When an employer invests in its employees’ development of specialized skills, exposes them to valuable and confidential business strategies and planning, or uses technology developed to compete, the employer can often assert it has a legitimate business interest in protecting itself against competition by restricting future uses by former employees.

As companies downsize and redeploy human capital outside of the traditional corporate office environment due to COVID-19, additional attention should give towards safeguarding against the loss of valuable trade secrets and defending against the risk of unfair competition through misappropriation. That’s where well-drafted employment agreements come into play. Indeed, thoughtful employers may already be taking second looks at their non-competition, non-solicitation, and non-disclosure agreements. These agreements are enforceable in Florida if “reasonably necessary to protect the legitimate business interest or interests justifying the restriction.” § 542.355(1)(c), Fla. Stat.

In Florida, once the employer shows the restrictions it seeks to impose are reasonably necessary to protect a legitimate business interest, the employee must show “that the contractually specified restraint is overbroad, overlong, or otherwise not reasonably necessary to protect the established legitimate business interest or interests” to prevent enforcement. If a restrictive covenant is either overlong or overbroad, the Florida statute vests the court with the power to shorten or limit the scope of the restriction, rather than declaring it void. In those circumstances, the “court shall modify the restraint and grant only the relief reasonably necessary to protect such interest or interests.”

But why leave it to a court to try to determine what is reasonably necessary to protect your business from unfair competition? A better approach is to tailor restrictive covenants to the unique aspects of your business worth protecting. For example, suppose an employer teaches its employee a unique method or skill, or the employee develops a customer list to sell her employer’s gourmet hotdogs in Miami. In that case, a reasonable restriction should be drafted to restrict her ability to apply her unique training or otherwise sell a competitor’s gourmet hot dogs in Miami. Is it reasonable to also restrict her from contacting her former employer’s customers for any reason at all? Perhaps not, unless the former employer can show it has or is reasonably likely to lose business or suffer damage to its goodwill as a result.

The Florida Supreme Court’s guidance reflects the highly fact-dependent nature of how a trial court will treat of the enforceability of a binding non-competition agreement. It has explained “[s]itting in a Tallahassee courthouse with a frozen record before us, we cannot precisely define the exact parameters of what constitutes a ‘legitimate business interest’ in the myriad of commercial disputes that may arise across this diverse State.” One size does not fit all.

Distinct from Florida’s state courts, Federal courts in Florida taka slightly different approach when a preliminary injunction against a former employee is sought. Federal courts seek to find a balance between the potential harm to the employee that enforcement of a non-compete provision may cause with the protections needed by the employer to protect its business interests. Florida state courts, however, are expressly prohibited by statute from considering the hardship that might be caused to the person against whom enforcement is sought. Thus, to simplify the path to an injunction against a departed employee who leaves to compete, employers may want to revisit their employment agreements to determine whether they dictate that the mandatory venue for enforcement of restrictive covenants is in a Florida state court, rather than a Federal court.

Gavin C. Gaukroger is a partner with Berger Singerman and specializes in complex commercial disputes in trial and appellate courts. He can be reached at ggaukroger@bergersingerman.com .

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This is an opinion piece written for Business Monday’s “My View” space in the Miami Herald. The views expressed do not necessarily reflect those of the newspaper.

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