A Business-First Approach To The Practice Of Law

3 situations when a restrictive covenant may be unenforceable

On Behalf of | Apr 11, 2023 | Business Law |

Restrictive covenants, such as non-disclosure agreements and non-compete agreements, serve an important purpose. When used correctly, they can shield your trade secrets from your competitors.

In some circumstances, however, your restrictive covenant may not be enforceable. There are several reasons a court may find your contract invalid.

The restrictions are unreasonable

In Florida, there are limits to how long you can enforce a restrictive covenant. The limit depends on the type of restriction. For example, a non-compete agreement with a former employee generally can not last longer than two years.

You must also be able to demonstrate that the restriction protects a “legitimate business interest.” If you can not prove that the restrictions are necessary, the court may decline to enforce the contract.

The restrictions impact public welfare

Courts will generally not enforce a restrictive covenant that has a negative impact on public health or welfare. For example, if there is a drastic shortage of workers in your industry, the court may override your non-compete agreement to allow your former employee to work in the industry.

The restrictions are no longer relevant

If you have changed industries, your previous contracts may no longer apply. Since the purpose of restrictive covenants is to protect your business interests, the court might not uphold a contract that is not relevant to your current field.

Protecting your trade secrets is important to the success of your business, and restrictive covenants are an important tool to accomplish this. However, it is important to understand how to use them properly.

Founding Partners Damaso W. Saavedra and Allyson D. Goodwin