By: Clark, Campbell, Lancaster & Munson, P.A.
Q: Can an employer restrict or prohibit an employee from competing with the employer once the employee’s employment has ended?
Employees, under Florida law, are limited in their ability to compete with their employer while employed by the employer because employees owe their employer a duty of loyalty. However, this duty of loyalty generally ends when an employee’s employment ends, and, upon ending, the employee could potentially compete against their former employer. Accordingly, employers should consider whether it is in their best interest to restrict or even prohibit an employee from competing once their employment ends.
Generally, there are two main types of restrictions employers place on employees to limit their ability to compete. The first is a non-compete restriction, which limits the employee’s ability to participate and compete in the same business of the employer. The second is a non-solicit restriction, which limits the employee’s ability to solicit the employer’s customers, potential customers, employees, and other business relationships. Both restrictions are generally set forth as restrictive covenants in a written agreement between the employer and employee.
Florida’s public policy disfavors restrictive covenants that limit competition or solicitation, so employers must carefully draft such restrictive covenants in order to comply with Florida law. Florida law provides that a restrictive covenant must be in writing and signed by the employee against whom it will be enforced. Further, a restrictive covenant must protect an employer’s legitimate business interest that justifies enforcement of the restrictive covenant. For example, an employee may have access to or obtain knowledge of an employer’s trade secrets or customer lists that are not available to the public. The employer has a legitimate business interest in protecting such information, and such interest may justify the employer restricting its employees’ ability to compete with employer.
Lastly, any restrictive covenant must be reasonable in terms of geographic scope, line of business, and time. Generally, a restrictive covenant should limit the employee’s ability to compete in the geographic region that the employer operates in and where the employee is employed or works. Additionally, a restrictive covenant should limit the employee’s ability to compete in businesses actively engaged in by the employer. Finally, the length of time the employee is prevented from competing must be “reasonable.” A reasonable time period, as determined under Florida law, varies depending on the role of the employee and the legitimate business interest the employer is trying to protect.
As such, while an employer is able to restrict or even prohibit competition or solicitation from its former employees, any such restrictions must be reasonable and must comply with all of the requirements of Florida law.
Latest posts by CCLM Law (see all)
- Choosing the Right Business Structure - September 19, 2019
- LLC’s Electing to be taxed as S Corporation - September 5, 2019
- Defect Disclosure Requirements for a Residential Sale - November 1, 2018