Not All Non-Competes Are Created Equal: Make Sure Yours Are Enforceable
In today’s unsettled economic and regulatory landscape, health care organizations should zealously protect their workforce and proprietary information. To that end, a well-crafted non-compete agreement can serve as one of an entity’s most important assets. If drafted and applied appropriately, a non-compete provision can restrict departing employees from pirating and using or disclosing a company's proprietary materials and information, such as marketing techniques, specialized training methods, business plans, referral sources, and corporate goodwill. In order to effectively use such a powerful tool, it is critical that health care providers understand the scope and limitations of restrictive covenants under the current law.
Simply requiring all employees to sign boiler-plate agreements is often insufficient. Under Florida law, non-compete provisions are presumptively enforceable, but such provisions do have limits. A non-compete agreement’s restrictions must be reasonable in its terms of scope, geographic boundaries, and time. The law allows a court in many circumstances to “blue-pencil” the agreement and adjust its terms to make it more reasonable and fair if the terms of the agreement are too broad.
Because non-compete agreements are promulgated to protect a company's proprietary information and trade secrets, employers must establish that there are “legitimate business interests” worthy of protection. Courts will not enforce restrictive covenants imposed solely to punish workers who seek employment elsewhere. The courts must weigh the balance between protecting the interests of the employer and the restraints on the former employee.
Further, even if the agreement itself is reasonable, there are some circumstances in which enforcement of the agreement of the parties may not be proper or just. Employees seeking to avoid enforcement of a non-compete provision may argue the restriction should not be enforced due to the “unclean hands" of their former employer, such as sexual harassment, racial prejudice, or violations of state and federal law (e.g. Stark violations). In this regard, employees may allege that the restriction should be lifted because the employer’s misconduct led them to seek work elsewhere. Simply put, courts are reluctant to punish employees for leaving organizations that violate state and federal laws, regulations, or ordinances. The law also protects employees who have been retaliated against for objecting to illegal employment-related conduct.
Finally, an employer’s breach of the employment contract, including its refusal to pay wages and bonuses earned by the employee, may invalidate an otherwise enforceable restrictive covenant. Accordingly, engaging in self-help is not recommended.
It is for these reasons that the law remains dynamic. The subtleties in the language of the agreement and its enforcement could determine whether a court upholds the covenant, adjusts its restrictions, or even releases the employee from the restriction. It is never too late to seek professional legal advice concerning non-compete clauses. Whether an employer seeks to craft an enforceable non-compete contract or evaluate its rights under an existing agreement, an attorney well-versed in this arena can be invaluable. Looking for this advice early on can often be a great cost-saving measure.
Scott Knapp is a litigation attorney in the Fort Lauderdale office of the statewide law firm Broad and Cassel. He may be reached at (954) 764-7060 or firstname.lastname@example.org.