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What Florida business owners should know about restrictive covenant law

On Behalf of | Aug 3, 2020 | Business Law |

Restrictive covenants prevent employees from competing with and soliciting customers from former employers. While these covenants, often called noncompete and non-solicit agreements, can protect business owner interests, Florida courts often find them invalid. 

Florida business owners who hire employees should understand the state laws about restrictive covenants when deciding whether to ask workers to sign these documents. 

Required justifications

An employer that has employees sign restrictive covenants must have a legitimate business reason for doing so. Examples of legitimate interests include: 

  • Trade secrets 
  • Significant relationships with clients, patients and customers 
  • Professional or business information with monetary value that does not qualify as a trade secret 
  • Business reputation associated with a niche trade area, a geographic location or trademark 
  • Investment in specialized training 

The employer must show that competition by a former employee would damage a valid business interest. For example, the court would be unlikely to enforce a noncompete agreement covering trade secrets signed by a worker who had no access to the confidential information. 

Validity concerns

Florida courts will not enforce a restrictive covenant with an overly broad scope. The judge will look at the geographic area defined by the noncompete or non-solicit agreement, which cannot generally extend outside the company’s actual business area. 

A valid agreement must also have a reasonable time frame. While Florida law does not define a duration specifically, most states limit the validity of a restrictive covenant to no more than three years. 

Florida courts will only enforce valid restrictive covenants in writing. Oral noncompete and non-solicit agreements are invalid under state law. 

Special physician provisions

Individuals who operate health care facilities should be aware of specific Florida non-compete provisions regarding physicians. Health care employers cannot prevent doctors from practicing within a medical specialty if the company has a contract with every physician in the county with the same specialty. 

Businesses should keep these concerns in mind when determining whether restrictive covenants make sense. Florida courts are more likely to enforce noncompete and non-solicit agreements with a short duration and narrow geographic scope. 

Founding Partners Damaso W. Saavedra and Allyson D. Goodwin