Even though we live
in a capitalistic society that favors
competition, contractual limitations between
competitors are a legal reality in the State of
Florida. The consensus in this country is
that competition stimulates quality products and
services which benefit the consumer. On
the other hand, our legislature has acknowledged
a need to allow the enforcement of contractual
terms that prohibit competition between private
parties. The Florida legislature tried to
establish a balance between the right of the
individual to earn a living and the rights of a
businessmen to protect their trade secrets and
confidential business information. In
1996, the Florida Legislature approved Section
542.335 codifying the aforementioned balance of
interest.
Because the
legislation is somewhat complicated, I can only
offer a general idea of its framework. It
is important, however, that all business owners
be aware that this mechanism is available and
can be useful in protecting their intellectual
property and confidential business information.
In turn, employees should likewise be aware
that, under certain circumstances, an employer
can limit their right to work in the field of
their choice.
The law acknowledges that
most entrepreneurs accumulate confidential
information during their commercial endeavors that
affords them a competitive advantage in the market.
This legislation recognizes that business owners
have a right to protect this information through the
judicial process. As long as there is a
written agreement between the employer and the
employee prohibiting competition in a certain
specific geographic area and/or for a reasonable
period, the court can order the employee to
terminate the employment that competes with his/her
former employer.
These contractual terms
are also commonly utilized in the purchase and sale
of existing businesses because it serves to protect
the buyer from unfair competition by the seller.
A purchaser of an existing business that does not
demand a covenant not-to-compete in the purchase and
sale agreement runs the risk of significant
financial losses as a result of unfair competition
from a seller.
Even though the
Legislature intended to avoid unfair competition,
many judges have opted to implement the specific
terms of the employment agreement regardless of the
serious financial losses suffered by the employee
that is compelled to terminate a subsequent
employment. I have handled multiple cases of
this nature and firmly believe that a well-drafted
agreement could achieve the fair balance that was
intended by the legislation.
Accordingly, I highly recommend that any person
contemplating entering into a covenant
not-to-compete agreement consult with a professional
experienced in dealing with this unique piece of
legislation.
|