The Basics Of Noncompete Agreements
In the world of construction, you may have many employees that are not only invaluable to you, but which are privy to sensitive secrets of how your construction business operates, and does business. You may want to make sure that the people who work for you don’t take your information—or the training or experience you have given them—and start to compete against you.
Using Noncompete Agreements
You can avoid this from happening by having employees sign a noncompete agreement. Noncompete agreements will allow you to sue if a former employee works with a competitor, or starts his or her own business in your field or industry. These agreements aren’t enforceable in all states, but they are in Florida—if they’re drafted properly.
Requirements for a Valid Restriction
Noncompete agreements have to be in writing and signed by the party who is agreeing to the noncompete agreement.
Noncompete agreements must be protecting a legitimate business interest. Although this is vague, Florida law breaks “legitimate business interests” into five categories: 1) trade secrets 2) any information that is confidential, and kept private 3) customer relationships or the goodwill of your client base and/or 4) any training given to employees that is considered specialized or technical.
You should list in your noncompete agreement, what interest you are trying to protect. You can list interests beyond the 4 listed above—the list is not all-inclusive.
There also needs to be a showing that the noncompete agreement is necessary to protect the stated interests.
Reasonable Time Periods
The restrictions you place on employees (or former employees), needs to be reasonable, and not overbroad or over-reaching. There are certain time and geographic restrictions that are automatically considered reasonable and thus enforceable.
For example, for a former employee, restrictions that are less than 6 months are automatically considered reasonable. Restrictions that extend beyond 2 years, are assumed to be unreasonable.
The assumption of what is reasonable and not reasonable varies, depending on who is being restricted. For example, there are different time periods that are reasonable if you are a former employee, dealer, franchisee, or the seller of a business. For restrictive covenants that solely are to protect trade secrets, courts will assume that anything up to 5 years is reasonable.
You should have an employee or contractor or anybody else, sign the restrictive covenant at the beginning of the transaction. In other words, before you sell the business to them, or before you hire the person. Otherwise, if you come back later with a noncompete agreement, you risk the court saying there is no consideration for the noncompete agreement.
Also note that restrictive covenants should specifically say whether they are enforceable by successor businesses. That way if you sell or transfer the business, the new owner can still enforce the agreements.
Our Fort Lauderdale business law attorneys at Sweeney Law P.A. at 954 440-3993 can help review your business contracts and agreements.