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Noncompetes Are Important But Time Spent Drafting Them Is More Important

by Brian L. Lerner on Categories: noncompetes

Noncompetes Are Important But Time Spent Drafting Them Is More Important

Noncompetes Are Important But Time Spent Drafting Them Is More Important

Articles about noncompete agreements all kind of start the same way. Noncompete agreements are essential given increasing competition, decreasing employee tenure and loyalty, and technological advances. These are all good reasons. But the analysis cannot stop there. These agreements only have true value (i.e., enforcement) if forethought is put into writing these agreements.

Remind me, what are these agreements? 

People sometimes use the term “noncompete” in reference to several concepts. This term could refer to a noncompete (forbidding an individual from working at a competing company), a protection of confidential information (prohibiting the taking or use of confidential or trade secret information for any purpose other than for the employer), or a nonsolicitation (forbidding an individual from poaching employees or customers to join the individual at his/her new company). Lawyers generally refer to these concepts collectively as “restrictive covenants.”

But I thought courts won’t enforce these agreements?

Many people hold this belief, but Florida has a law that specifically provides that courts must recognize and enforce these agreements. Courts will not enforce these agreements because of the failure to prove that the agreement is (1) reasonably limited in time and area, (2) in writing, and (3) supported by a legitimate business interest. And that failure stems, many times, from using generic agreements that pay little attention to understanding what the employee does, what access the employee has to confidential information, and detailing what the company really wants to protect. Thus, to help bolster the chances of enforcing these agreements, companies need to spend the time up front to write an agreement that anticipates the problems that could arise in the future and spell out those issues in the agreement.

What things should be included in these agreements?

The agreement should include detailed definitions for critical terms like what is “confidential information,” who is an “employee,” who is a “customer,” who is a “competitor,” and what constitutes “solicitation.” If the employee does work for or has access to information about a company’s affiliated companies, be sure to include those companies in the scope of the definitions.

The agreement should identify how long will it will last and the geographic coverage area. It is easy to say that the shorter the time frame and the narrower the geography, the more likely the terms will be enforced. But this requires carefully analyzing the nature of the business and the duties of the employee as those factors could require longer and wider restrictions.

The agreement should make clear the restrictive covenants are independent (i.e., remain in force) regardless of the obligations that the company may owe to the employee. This language could help avoid employees arguing to a court the agreement cannot be enforced because, for example, the company violated a law when terminating the employee.

These are just three suggestions. There are lots of other provisions that should be included. But this demonstrates that while having restrictive covenants in place is an important business practice, companies should spend the time upfront carefully drafting these agreements.

Brian Lerner is board-certified in labor and employment law representing businesses and individuals in employment-related matters. He is the chair of the Labor & Employment Group at Kim Vaughan Lerner LLP.

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