Better Think Twice About Enforcing A Non-Compete

Over the last couple of years, there has been an increase in employees striking back against employers trying to enforce non-compete agreements.  In those cases, the employee argues that his former employer has interfered with his new job or business relationships.

For example, an employee in Rutherford County, Tennessee sued his former employer for getting him fired from his new job.  In Harper v. Chemtrade Logistics, Inc.[1], Harper sued Chemtrade Logistics, Inc. after USALCO, Harper’s current employer and a Chemtrade competitor, terminated him.

According to Harper’s complaint, Chemtrade claimed it had a valid non-compete agreement with Harper and threatened to sue USALCO unless it terminated him.  As a result, Harper alleged, he is no longer able to work in industrial chemicals, the industry in which he has been employed for the last two decades.

Harper’s lawsuit raises a difficult issue for employers who attempt to enforce their non-compete agreements:  Can the former employer who alerts the new employer of its non-compete agreement be liable when the new employer terminates the employee?  As a general rule, and without commenting on the claims made in Harper, the answer is it depends on the facts.  In 1994, the Tennessee Supreme Court said in Forrester v. Stockstill[2] that a person who intentionally interferes with another’s employment, without privilege or justification, may be liable.  It does not matter whether the employee is at-will or under contract.

Though Forrester does not address the exact issue raised in Harper’s suit, employees in other states have sued former employers for “intentional interference with employment,” the legal principle stated in Forrester, when employers attempted to enforce their non-compete agreements.  For example, an employee in New York sued her former employer after her new employer fired her.  In Gentile v. Olan[3] the employee alleged her former employer interfered with her employment when it threatened to sue her new employer over the employee’s non-solicitation agreement. The court in Gentile allowed the case to proceed to trial so the jury could determine if the former employer was liable for its actions.

Apart from the factual issue of whether Chemtrade did what Harper alleges, the key legal issues in the Harper case include whether Chemtrade’s alleged conduct was intentional or malicious, and whether it was privileged or justified.  Based on Harper’s allegations, a key factor will be whether Chemtrade had a valid non-compete agreement with Harper.

Even if the court decides Chemtrade’s non-compete agreement is unenforceable, the court could find Chemtrade is not liable because it was justified in attempting to enforce the contract.  The Tennessee Supreme Court has said “the question of [a non-compete agreement’s] reasonableness must be decided on an ad hoc basis.”[4]  This means that in some cases, “an employer is justified in litigating the question of whether or not [the employee] had breached the non-competition agreements . . . .”  In those cases, “it cannot be said that the agreements . . . are illegal and unenforceable, per se,”[5] and employers may be justified in trying to enforce them.

Though non-compete agreements are generally enforceable in Tennessee, the Harper suit shows that employers can be put on the defensive by employees who believe their livelihood is at risk.  Employers can be better prepared for such attacks by drafting defensible non-compete agreements on the front end.

 

[1] Rutherford County Chancery Court Docket No. 14CV1409 (Sept. 29, 2014).

[2] 869 S.W.2d 328, 330 (Tenn. 1994).

[3] 2013 WL 1880771 (S.D.N.Y. May 6, 2013).

[4] Allright Auto Parks, Inc. v. Berry, 409 S.W.2d 361 (1966).

[5] Riggs v. Royal Beauty Supply, Inc., 879 S.W.2d 848, 852 (Tenn.Ct.App. 1994).

Continued Employment is Enough for a Severance Agreement

Here’s one where the tables were turned. Former employees often argue that a non-compete agreement is unenforceable because there was inadequate “consideration.” Consideration is the exchange parties to a contract make, what one side gives to the other that makes the contract binding. Consideration can be in the form of a promise for a promise, money for services or goods or some other thing of value the parties exchange.

When a former employee says there was inadequate consideration, he is saying he did not receive anything of value in exchange for his agreement to not compete with his former employer. In Tennessee, the employee almost always loses that argument. In Tennessee, as in many other jurisdictions, the fact that the employer continued to employ the employee is sufficient consideration or value to the employee to enforce the non-compete agreement.

It turns out that continued employment can also be used against the employer. In a recent case, the Tennessee Ct. of Appeals held that the fact the employee continued to work for the employer was sufficient consideration, or value to employer, to enforce a severance agreement.

The employee Hensley v. Cocke Farmer’s Cooperative had worked for his employer for 28 years when, in 2010, when he signed a severance agreement. The severance agreement was effective until August 2024 and provided the employer agreed would pay the equivalent of the employee’s current salary and monthly health insurance premiums from the date of termination until August 2024. The only exception was if the employee was terminated as a result of death, merger, disability or “for cause,” which meant criminal acts related to the company or shareholders which led to a conviction.

Several months after the employee signed the severance agreement, the employer’s board terminated him “without cause.” Facing responsibility for several hundred thousand dollars in severance benefits, the employer refused to pay.

After finding that the severance agreement was clear, definite, unambiguous, and not difficult to understand, the court looked at whether there was adequate consideration supporting the agreement.

Up to this point, there had been no Tennessee case addressing what constitutes a sufficient exchange of value between an employer and employee to support a severance agreement. But, the court found that severance agreements were analogous to non-compete agreements, and Tennessee law is clear that continued employment is sufficient consideration to enforce the non-compete. The twist is that it is the employee’s agreement to continue working for the employer, not the employer’s agreement to continue employing the employee, that supports enforcing a severance agreement.

Because the employee in Hensley agreed to continue working for the employer, the employer was liable for $380,236.21 in accrued severance benefits and $6,125 per month for the employee’s health insurance premiums.

It is clear that the employer experienced buyer’s remorse, believing it had made a bad deal with the employee. However, as the court stated, “contract law in Tennessee plainly reflects the public policy allowing competent parties to strike their own bargains… Accordingly, the courts do not concern themselves with the wisdom and folly of a contract, and will not relieve a party of its contractual obligations simply because the contract later proves to be burdensome or unwise.”

While this rule does not always hold to be true, as there are many instances where Tennessee courts will modify or refuse enforce a contract, in this case, the court chose to enforce the severance agreement as written.

Attorneys who practice in the field of commercial contracts and employment related matters would have predicted this result. Sophisticated parties are presumed to be competent enough negotiate their own contracts. What’s interesting about this case is the continued-employment argument, which is usually used against the employee in a non-compete context, was used against the employer in the severance agreement context.

The Multi-State Non-Compete Agreement – Part 3

Our most recent article in this series (May, 2015) addressed the first step of the analysis necessary for the multi-state employer’s design and implementation of a manageable, limited number of noncompete agreements compliant with most, if not all, applicable state laws. That article addressed the identification of the “protectable interests” amongst all employees with the goal of matching the appropriate employee categories with the “right blend” of restrictive covenants needed for each employee group. With that background, we move to the next step in the process; identifying which of the employees’ resident states pose unusually difficult procedural hurdles to the enforcement of restrictive covenants at the onset.

There are essentially 2 such key hurdles. The first involves those state laws which require extra “consideration” beyond just continued employment for the enforcement of employee noncompete agreements. These states include South Carolina, North Carolina, Kentucky, Illinois, Virginia, Minnesota, Oregon, Washington and a few others. Most state laws of this type require employers to condition the actual hiring or promotion of the employee on his/her execution of the noncompete agreement or alternatively, for employers to provide some extra, material, monetary benefit in exchange for the employee’s signature. Some state laws such as Illinois go so far as to require “employer clairvoyance,” essentially stating that even signing the noncompete at the time of hire is insufficient if the individual’s employment does not ultimately last at least 2 years. Regardless, employees in these states compile a subgroup deserving of special consideration. For these employees, the multi-state employer can either choose to enter into noncompete agreements only with new-hires or provide the employees of these states with some additional incentive (i.e. bonus) in return for their execution of the noncompete agreement.

The second initial hurdle involves a very limited number of state laws which require that in order to be enforceable, a noncompete must be “ancillary” to an actual employment contract. Translated, this means that a stand-alone noncompete agreement will not be enforceable in these states. The contract must contain other terms covering the actual wages, hours and conditions of employment in order to be enforceable. Here, and for purposes of employee residents of these few states, the multi-state employer will either need to create a separate, all-encompassing agreement, bypass these employees altogether or use the stand-alone agreement knowing in the end, it will be unenforceable.

Stay tuned! The next article in this series will help narrow the field even more, taking a close look at those state laws which sanction the “blue pencil.”

The Chicago Cubs, Errors, and Arbitration of Florida Non-Compete Agreements

Some clients prefer to resolve disputes in arbitration. In theory, an arbitration proceeding can more quickly and — in some instances — more cost effectively resolve disputes. However because most arbitration clauses call for binding arbitration, many clients prefer to litigate disputes in court. At least a defeat in a courtroom carries with it the ability to appeal. If the court makes a clear legal error, the argument goes, an appellate panel can collectively correct the error and “set matters right.”

The Chicago Cubs are a National League baseball team. Perhaps you’ve heard of them? Like an arbitration panel, it is difficult to overcome some of their errors. The Chicago Cubs, by almost any standard, had an excellent 2015 baseball season. An impressive pitching staff, an optimistic and experienced manager, and a great second-half team effort allowed the Cubs to win the National League Wildcard Playoff and to beat the St. Louis Cardinals in the opening series. Instant replay may have decided some of the calls. None of those calls was subject to arbitration.

Getting back to Florida Non-Competes, a client recently asked the question: “Can parties agree to arbitrate, rather than litigate, an otherwise valid Florida Non-Compete agreement?” The simple answer is “yes.” The question gets more complicated when the sale of a business raises possible violations of the Non-Compete agreement and no arbitration clause exists in the purchase and sale documents relating to the sale. At least one appellate court in Florida determined that the question of whether or not the employee ran afoul of the Non-Compete agreement was subject to arbitration, despite the fact that the documents controlling the sale of the business contained no such provision.

In the matter noted above, the two-year Non-Compete agreement stated that during “the period of his employment… and for a period of two years immediately following the termination of such employment for whatever reason, Employee shall not have any direct or indirect ownership or other financial interest in any business which competes with the Business of the Company.” The employment agreement stipulated that the parties arbitrate disputes. The parties entered into the employment agreement commensurate with an agreement for the Employee to sell the business to the new employer. Unlike the Employment Agreement, the agreements related to the sale of the business did not contain an arbitration clause.

We all know what happens next. The parties have a dispute over their mutual contract performance and alleged breaches. Seller ultimately accuses the Buyer of misrepresentations intended to induce the sale and a series of other acts inconsistent with the agreement to purchase the company. The Seller sues in state court claiming that the Buyer violated the terms related to the parties’ sale and purchase of the business.

Citing the very broad language of the Non-Compete agreement, the Buyer (Employer) seeks to have the dispute resolved in arbitration in accordance with the Non-Compete agreement, despite the fact that the issues raised in the Seller’s Complaint did not specifically relate to the Employment Agreement or a breach thereof. (See generally Sunsplash Events, Inc., Fla. 4th DCA 2014). The trial court ruled against the Buyer, favoring the argument that the causes of action arose under the agreements to purchase the business (no arbitration clause) and not under the employment agreement (arbitration clause). The appellate court disagreed. In a detailed analysis, the appellate court ruled that the very broad language of the employment agreement was sufficient to encompass the claims Seller brought in the state court. The appellate court found a nexus between the disagreement over the sale of the business and the simultaneously-entered employment agreement. As a result, the appellate court ordered the parties to arbitrate the dispute (rather than litigate it in state court).

Readers of this blog are aware that courts favor arbitration clauses. Generally, courts give very liberal interpretation to arbitration clauses and favor resolving disputes in arbitration whenever the facts allow. In the case noted above, the appellate court surmised that an arbitrator could hear the entire dispute because the issue of whether the Buyer’s alleged fraudulent inducement occurred might also involve a determination of whether the Seller breached the employment agreement. As a result, the arbitration clause of the employment agreement mandated an arbitration proceeding rather than an action in state court.

As for the Chicago Cubs, after a fine season and a triumphant start to the 2015 Playoffs, the journey ended when the New York Mets swept the Cubs in four games to earn a trip to the 2015 World Series.

The take-away is this: the question of whether or not to arbitrate is worthy of discussion with your counsel. In some instances arbitration is required even when not anticipated (or preferred). And if you’re a Cubs fan, there’s always next year. At Burr & Forman we have lawyers throughout the southeast skilled in this area of the law. We do not have attorneys capable of predicting when the Cubs might win the World Series.

Florida Non-Competes: Physicians, Attorneys, Quarterbacks, Oh My…

Regular readers of this blog know that Florida law allows “valid restraints of trade,” under certain circumstances. Those restrictions apply to the employer-employee relationship when written and duly executed in accordance with Florida statutes. These restraints of trade are commonly called “Non-Compete” or “Non- Competition” agreements. There are similar restrictions that can prohibit a departing employee from using a former employer’s trade secrets.

Florida’s valid restraints of trade do not apply to attorneys. As a result, attorneys are not subject to non-compete agreements. Go figure.

Physicians, on the other hand, are often required to enter into non-compete agreements as conditions of employment. Recently a group of Florida physicians asked me whether Florida law recognizes a public policy argument that negates all non-compete agreements attempting to restrain doctors from practicing in the location of their choosing or seeing previous patients. The simple answer is “No,” however the analysis seldom ends there. Generally speaking, there is no statute or case law in Florida that negates the enforcement of an otherwise valid non-compete agreement against a physician or a physician’s practice. (There are cases that have disallowed the agreements, and there are cases in which the physician was found not to have violated the non-compete terms, however there are no cases that courts regularly cite or follow creating a public policy against restricting a physician’s practice after the physician departs from a prior employer.)

So what is a physician to do when she is attempting to relocate her practice or when she hopes to join a competitor? First, and perhaps most obviously, the physician can usually negotiate (read: pay money) to opt out of the non-compete agreement. Many times a physician’s non-compete agreement actually contains the manner and costs associated with the buy-out provision. The second vehicle to challenge a physician’s non-compete agreement is on the grounds of the definition of the reasonable restriction of geographic area. Some patients will travel great distances to see their doctor. The more specialized the physician’s practice, the more likely a court will recognize the need for a greater geographic restriction. (At the same time, the more specialized the physician’s practice, the more likely the physician can argue that an actual public policy concern justifies a court’s decision to allow an argument to render the non-compete void.)

What we have found over the years is that physician practices are not shy about enforcing non-compete agreements with departing physicians. At the same time, nearly all of these physician practice groups are far more interested in resolving these issues through (financial) negotiations than through the continuation of litigation. Either way, the law in this area is very nuanced and fact-specific. As with all non-compete cases, Florida courts are obligated to construe the written, executed agreements according to their plain terms, interpreting all ambiguities in favor of unrestricted employment.

Quarterbacks are entirely different. The typical non-compete comes in the form of untimely interceptions. As a life-long NY Giants fan it’s important to recognize that losing the first two regular-season games when holding a double-digit lead in the fourth quarter is simply non-competitive. This despite Eli Manning’s contract extension that included a guarantee of more than $60 million. Fortunately, the Giants held their fourth quarter lead in the third game. That’s more competitive. Note to Eli: please stay healthy. And Eli, if you suffer an injury, consider receiving your treatment down in Florida. We have some seriously great physicians here. They’re very competitive.

Alabama’s New Non-Compete Statute: Are You Ready For New Year’s Day?

Those involved in drafting, negotiating, or litigating covenants-not-to-compete in Alabama have long known that Alabama’s statute books seldom provide ready answers on this particular topic.  The text of current Alabama Code § 8-1-1, entitled “Contracts restraining business void; exceptions,” was — until this year — last amended in 1940.  This text consists of three short paragraphs and does not delve into details.  As a practical matter, this has meant that, for the past 75 years, it has been up to Alabama courts to fill in the details.

This is about to change.  On June 11, 2015, Governor Bentley signed into law House Bill No. 352, entitled “Contracts, use of restrictive covenants clarified, Sec. 8-1-1 repealed.”  The new law comes into effect on January 1, 2016 and repeals all of current Alabama Code § 8-1-1.

At least in some respects, the provisions of the new law mirror what Alabama courts have already been doing.  This codification of previous court outcomes into Alabama’s statute books should help to provide clarity when drafting, negotiating, and litigating future agreements.  In other respects, though, the new statute innovates.  As a result, employers will want to pay close attention to the new law and make sure that their existing agreements comply with the law.

The old and new laws both begin by stating the general rule that contracts restraining anyone in the exercise of a lawful profession, trade, or business are void.  However, the new law now enumerates, in detail, the exceptions to this general rule of voidness.

Section 1(b) of the new law lists, as exceptions, six categories of contracts that “are allowed to preserve a protectable interest.”  Of interest to employers, sub-items 1(b)(4) and 1(b)(5) include, within these exceptions, non-competition and non-solicitation agreements entered into between a “commercial entity” and an employee of that entity.  In other words, non-competition and non-solicitation agreements entered into as part of the employment relationship might be valid under Alabama law, but only if the agreements “preserve a protectable interest.”

Section 2(a) of the new law defines “protectable interests” so as to include not just “trade secrets,” but also “pricing information and methodology,” “customer lists,” “business models and data,” and “contacts with specific prospective or existing customers,” among others.  However, Section 2(b) says:  “Job skills in and of themselves, without more, are not protectable interests.”  As a result, employers seeking to enforce a non-competition or non-solicitation agreement will need to pay close attention to the list of “protectable interests” in Section 2(a).

For prohibitions on competition after the end of employment, the new law states that a restrictive covenant of “two years or less” in duration will be presumed reasonable.  This two-year period is, on the whole, consistent with Alabama court decisions over the past 75 years.  However, the new law then provides a shorter “presumptively reasonably” time-period (usually 18 months after the end of employment) for agreements prohibiting the solicitation of the employer’s customers.  These differing presumptions for non-competition and non-solicitation agreements are one of many reasons why Alabama employers may wish to review their non-competition and non-solicitation agreements for compliance with the new law.

New Year’s Day 2016 and Alabama’s new law are coming soon.  If you are an employer and have questions about how Alabama’s new law might impact a specific agreement your business uses, please feel free to contact a member of Burr & Forman’s “Non-Compete and Trade Secrets” team for additional information.

Tom Brady, Deflategate, and Florida Non-Competes

On far too many levels, Tom Brady is a star. “Deflategate” or not. Whether he actively participated in deflategate, passively participated in deflategate, or did not at all participate in deflategate, Tom Brady is a star. He belongs in the Hall of Fame. The committee no-doubt will vote him into the Hall of Fame at his earliest eligibility. He’s earned it.

Brady is competitive. No one questions that Brady’s competitive drive is one of the many keys to his continued success and longevity. Indeed, the well-known fact that Brady is competitive has caused many pundits to presume that he was either actually aware of the deflated footballs or was simply experienced enough to greatly suspect something was awry. Competition drives athletes.

Competition also drives successful businesses.

Free trade, in theory, increases competition. Competition forces innovation, higher productivity, better quality, lower prices or some combination of these elements to allow the marketplace to provide suitable options for everyone. Americans embrace competition. Americans reward competition. Our legal system is intentionally set up as an “adversary system” that demands competition.

Florida law recognizes this.

Florida law also recognizes an individual’s freedom to enter into contracts. When it comes to employment, Florida is called “at-will”. That means, essentially, that as long as you don’t violate Florida or federal discrimination laws (or the company’s internal employment rules or agreements), an employer can terminate an employee at any time, for any lawful reason. As anyone familiar with this blog also knows, Florida law also allows “valid restraints of trade” with regard to employment under certain circumstances found among Florida’s anti-trust statutes. The more common phrases for these valid restraints of trade are non-competition agreements or non-compete agreements. In Florida it is lawful for an employer to have the employee enter into a non-compete agreement as a condition of employment. Even a long-term employee can lose her or his job if the employer demands the execution of a non-compete agreement and the employee refuses to enter one. These Florida statutes neither apply to everyone, nor do these statutes apply equally. Florida law distinguishes among employees, allowing longer periods of non-competition for upper level management. As you might expect, Florida law also mandates that the restraint from future employment is reasonably intended to protect the employer’s legitimate ongoing business interests. Because Florida courts generally favor competition over restraints of trade, all Florida non-compete agreements are strictly construed. As a result, it’s critical to involve an experienced attorney when drafting or reviewing a non-compete agreement.

Tom Brady is one seriously competitive quarterback. Nearly every team in the NFL would substantially improve with Tom Brady under center. What if you’re the best at your position? What if you’re the Tom Brady of your profession? What if your competitive nature resulted in your success beyond even your employer’s wildest dreams? Does Florida law allow an exception? Yes and no. Lawyers are not subject to Florida’s restraint of trade statutes. (Go figure.) However Florida’s “valid restraint of trade” laws apply to doctors and nearly all other employees.

Brady is exceptional in many ways. Fortunately for football fans, deflategate suspension or not, Brady’s competitive spirit remains unrestrained.

The Multi-State Non-Compete Agreement “Drilled Down”

Our February article addressed the options available to the multi-state employer attempting to design its non-compete agreements within the “tangled mess” of the various state laws applicable to agreements for employees who reside within those various states. In that article, we advised that unless management has the resources to design, update and manage separate agreements tailored to each applicable state law, the best alternative is to design an “asset protection program” to include as few versions of the agreement as possible, tailoring each version to as many, similar state laws and job categories as possible. In this and subsequent articles, we will dig deeper into the variety of business and state law issues involved in this process.

Initially, employers should identify all employee/independent contractor responsibility levels and titles to be covered by the company’s non-compete agreements and the states in which those employees/contractors reside. Here, it is important to note that most state laws will not support the enforcement of a non-compete covenant unless the employer has a material, protectable interest supporting its post-employment non-compete restrictions. Translated, this means that most state laws will not support the enforcement of non-compete or even customer non-solicitation covenants signed by non-supervisory, non-sales and non-managerial employees. So, don’t expect to enforce a non-compete or non-solicitation covenant when it comes to your administrative assistant or your production employees. Furthermore, a detailed analysis of each employee category in the context of applicable state laws as opposed to a “one-size-fits-all” agreement will aid in the enforcement process. By way of example, it may be ill-advised to include non-compete and customer non-solicitation covenants within the agreements designated for North Carolina-based scientists because such scientists do not have access to customers or secret formulas which could be damaging if they leave for a competitor. In states such as North Carolina where the enforcement of a non-compete or customer non-solicitation is somewhat unpredictable, a good solid confidential information covenant may be preferred.

Along these same lines, this first step will also pave the way for other critical discussions with your counsel. The four primary types of employee restrictive covenants – the non-compete, customer non-solicitation, employee non-solciitaion and confidential information covenants – have varying applications depending on the nature and level of employee to which the agreement is directed. Each occupies what could be described as a “sliding scale of enforceability. Non-compete covenants which, to some degree or another, restrict a former employee’s subsequent employment in the industry are the most difficult to enforce, followed by the customer non-solicitation, the employee non-solicitation and finally, the confidential information covenant. As such a careful categorization of targeted protectable interests for each employee category and the state laws involved for each will help ensure enforcement and reduce the number of agreement versions your Company is required to manage and update.

We will expand on this analysis in future articles, taking a closer look at other key components of this analysis including adequate consideration, blue-penciling laws and the non-compete versus non-solicitation analysis.

Florida Non-Competes and the NCAA Tournament Sweet Sixteen

After a wild weekend of some predictably close games and some stunning upsets, the original 68 teams vying to play among “bracketology’s” fortunate 64 are now whittled down to the sixteen teams left standing. The President of the United States picked Villanova to play deep into the tournament. Alas, a scrappy NC State Wolfpack team knocked out the Wildcats from Philadelphia over the weekend. Nonetheless, many of the powerhouse teams remain, including Wildcats from both Kentucky and Arizona. If you prefer other animals, you can always root for Badgers, Bruins or Cardinals. Pugilistic and militia team names are also available. Indeed, unlike many years loaded with animals of various color, this year’s Sweet Sixteen hosts Fighting Irish, Mountaineers, Spartans and Tar Heels. If you’re feeling Devilish, a blue variety plays against Utes later this week.

Only a few more days of college basketball remain before a Monday night in early April when one team will earn the National Championship. All other teams will end their season with a loss. For many coaches, advancement in the NCAA Tournament guarantees another year of coaching at their present school (and possibly a hefty salary increase). For coaches interested in moving to different schools, nothing says “I’m ready!” quite like taking a Cinderella team deep into the three-week national obsession called March Madness.

Yes, the free flow of commerce (specifically the free flow of human commerce in the form of transitioning college basketball coaches) is alive and well in NCAA basketball. On the other hand, for anyone who regularly follows this blog, you know that Florida law allows employers and employees to agree in writing to restrict their future employment in direct competition to the current employer. Can you imagine if college basketball teams enforced non-competition agreements among coaches? Sure, it’s unlikely that coaches at the nation’s premier programs would want to leave their schools. Winning programs attract the best available recruits. The best recruits often create the best future teams. The circle of winning continues. The fan base increases, as does the coach’s salary. Why ever leave?

The same is true for your business. If your employees find themselves at the top of the pay scale and performing at their peak, they may not want to leave. Of course ̶ as you likely know already ̶ your competitors typically seek only your finest employees. And like college coaches, reputation and salary generally drive either the desire to stay at a current position and company, or a desire to display talents from a different arena.

Florida law allows for an avenue to protect businesses from poaching competitors and the losses incurred with departing employees. Florida courts will strictly enforce written, duly executed non-compete agreements among Florida employers and employees. Although there is no statutory format for the actual non-compete language, Florida law has specific boundaries within which a court considers the validity of a non-compete agreement. In very basic terms, Florida law allows increased restrictions on future employment on higher level employees and business owners selling their businesses. Lower level employees entrusted with a company’s trade secrets can also expect future employment and data-use restrictions, however the length of the employment restrictions is typically less than with executives or with employees in management.

At Burr & Forman LLP we have attorneys in nine offices throughout the Southeast knowledgeable in this area of the law. Whether your business needs help drafting a non-competition agreement or enforcing a non-competition agreement, it’s important to seek competent counsel experienced in this area of the law. In the meantime, employers should take solace that only sixteen teams remain in the NCAA tournament. That fact alone will greatly increase productivity from last week… even if your alma mater is a Cinderella with a coach soon to depart for a more lucrative coaching opportunity.

New Year’s Resolution Continued: the Multi-State Non-Compete Agreement

With (most of) 2015 ahead, it is an opportune time to continue with our theme of employee non-compete agreements and resolving to review, assess and update your company’s agreements as a critical component of your ongoing and vital asset protection program. It goes without saying that an otherwise good start to the new year can come to an abrupt end when the company learns that a valued employee has “jumped ship” to the competitor because she knew what we didn’t; that her non-compete agreement with our company was outdated and no longer worth the proverbial paper on which it is written.

If your company employs individuals in two or more states, your “starting point” for this project is different (and more complex) from that of the Company which employs individuals in just one state. The underlying premise is one with which you are probably familiar; the laws surrounding the enforcement (or lack thereof) of non-compete agreements are matters of varying state, not federal law.

Assuming your Company has the financial and human resources to draft, implement, monitor and amend non-compete agreements tailored to the specific laws of each state in which it employs individuals, that is likely your best option. State-law tailored agreements which can be monitored and kept current with the ever changing legal landscape undoubtedly increase the likelihood of enforcement – at least in the short term. But, this is a very time consuming and expensive process that often, for legitimate reasons, falls by the wayside. While multi-state employers start out with great intentions and often spend a significant amount of money and time on the front-end of this project, higher priorities take over and these tailored agreements are rarely monitored in accordance with and therefore left victim to ever-changing state laws.

Most multi-state employers take a different route; limiting the number of versions of their non-compete agreements to one or very few. Certainly, from contract management, assessment and enforcement perspectives, one or a very limited number of versions lends itself to a more manageable program. That said, the drafting and enforcement of standardized, multi-state, non-compete agreements can also be a very complex and somewhat treacherous mine field of issues, deserving of a significant amount of managerial and experienced legal analysis on the front-end. Most often, the adoption of this type of “non-compete program” involves a detailed analysis of the laws of the states where employees reside, the duties and titles of the employees who will be asked to execute and similar issues. But, in the end, the multi-state employer has a solid foundation for this component of its asset management program for years to come.

We will expand on this analysis in future articles, taking a closer look at its key components including adequate consideration, blue-penciling laws and the non-compete versus non-solicitation analysis.