Can you still include non-compete clauses in employee agreements?

On Behalf of | Sep 4, 2023 | Contracts

Businesses in some industries rely on non-competition (non-compete) clauses in employment or severance agreements to prevent employees from taking the information and skills they’ve acquired while working there to a position with a competing company. Tech companies, toy manufacturers and other businesses where new and unique products are developed are among the businesses where they’re most needed. 

Unfortunately, non-compete clauses have become overused. For example, some fast-food restaurants require all employees – many of whom earn barely more than minimum wage — to agree to non-compete rules. This can severely limit their job options for no good reason. 

That’s why the Federal Trade Commission (FTC) is working on a rule to ban most non-compete clauses at the federal level so they’re used only when necessary and, even then, don’t unnecessarily prevent people from getting work. The FTC is reportedly planning to vote on a final rule next year.

What does Florida law allow?

While some states have already placed strict restrictions on non-compete clauses, Florida law still allows them – with limits. For example, it states that such as clause (or “restrictive covenant”) must be “reasonable in time, area, and line of business.”

The law also stipulates that to enforce a non-compete clause, a party must “prove the existence of one or more legitimate business interests justifying the restrictive covenant.” These include trade secrets and other intellectual property, confidential information and “relationships with specific prospective or existing customers, patients, or clients.”

Of course, there are other types of clauses or agreements, such as non-disclosure agreements (NDAs) that can be used to prohibit employees from sharing confidential, proprietary and sensitive information without restricting their employment opportunities.

Laws around what kinds of limitations employers can and cannot place on employees during and after their time with an organization are changing all the time. That’s just one reason why it’s crucial to have legal guidance as you develop your employment and other contracts and when you need to take legal action to enforce them.