New Year’s Resolution: Review Non-Compete

December 23, 2014 by

With the holidays around the corner, college football “Bowl Season” ramping up, and the singing of Auld Lang Syne within earshot, many employers not in the retail or travel businesses are wrapping up 2014 and preparing to start off 2015 with a strong first quarter. Some businesses shut down for the week between Christmas and New Year, understanding that many employees plan either to travel to family or to otherwise take long-saved vacation time. The New Year is sure to bring many changes. Congress will have a new look for at least another two years and the economic uptick across most industries not related to oil production is expected to continue to drive the economy forward in its recovery. http://www.burr.com/NewsResources/Resources/~/media/EF6EAAB39DEA4277AA841FEA92886D09.ashx

As a result, for most business leaders, the outlook for 2015 is positive. Employers also know that positive growth conditions can lead to competition among employers for the best employees. To complete the circle, competitive companies often court the most marketable employees during periods of economic growth. And so we get around to non-competition agreements and the question of whether or not your company’s non-competition agreement can give you a competitive edge when the economy’s opportunities call on your best and brightest.

To start with basics, it is important to understand that in almost all circumstances state law governs the legality and enforceability of non-competition agreements. In Florida, for instance, the legislature has penned a statute that defines the circumstances in which an employer can contractually restrain its current employees and the parameters that courts interpreting Florida law can use to determine the enforceability of a non-compete agreement. Not all states allow these agreements. Many states limit the agreements to certain professions.

Presuming you come from a state whose laws allow agreements that restrict the future employment of former employees, the end of the year is usually a great time to review the parameters of any in-place agreements and to work with your counsel to prepare an enforcement strategy… just in case. Keep in mind that non-competition agreements vary widely both in their complexity and in the length of their term. Some non-competition agreements allow the departing employee to essentially buy their way out of the restrictions. Others simply discuss an area and time frame in which the departing employee cannot compete.

However complicated your agreement, it is always best to develop your enforcement strategy before an employee departs. At Burr & Forman we have attorneys in offices throughout the southeast with the experience to help you develop your non-competition agreements, your enforcement strategy, and — when necessary — to take legal action for enforcement.

Filed Under: Florida, Non-Compete Agreements Tagged With: , ,

Non-Competition Agreements: Black Friday, Cyber Monday or Bust

December 1, 2014 by

This is one of those funny calendar years where Thanksgiving tucked itself deep into the month of November, leaving far too little time for people to contemplate the upcoming holidays and whether or not it’s actually appropriate to wear that 1980’s – style sweater to the office. (As an aside, you may have convinced yourself that your sweater still fits. Office tip: it doesn’t.) So here we all are, scrambling to make the perfect Thanksgiving celebration, wondering how we’re going to complete the year’s remaining tasks before year-end, and otherwise scrambling like we have in virtually all previous holiday seasons. Yes, this is the perfect time of year to practice the annual ritual of attempting a moist turkey using a never-before-tried recipe. If you’re an employer, this is also the perfect time of year to look at your company’s non-competition agreement and how you might enforce it. As with all of these blogs, it’s important to note that ̶ generally speaking ̶ each state has its own rules and laws on the legality and enforceability of employer/employee non-competition agreements. In Florida, the legislature has created a statute specifically on point (hidden as it is among other laws discussing “restraint of trade”). Under a defined set of circumstances, Florida law allows an employer and an employee to enter into a non-competition agreement that limits for a period of time a departing employee’s ability to directly compete with the former employer. Some states specifically disfavor these restraints of trade. Some states allow an employer and employee to enter into a non-competition agreement without the benefit of having a statute on the matter to help define the allowable scope of such an agreement. On Black Friday and Cyber Monday retail stores around the nation and across the internet severely discount their products and services in order to attract customers and in an effort to turn their fiscal year profitable. It is the ultimate competition for consumer dollars. Similarly, businesses of all types are also using the final month of the calendar year to maximize collections and increase annual profits. For many employers this is also a time to contemplate whether and in what amount employees will receive annual bonuses. Knowing this, many employees wait until after their employers distribute bonuses to inform the employer that the employee intends to soon start working at a competitor. For many employers, this is the first time all year that will they look at the terms of their non-competition agreement and attempt to determine whether or not the terms are easily enforceable against the departing employee. However, just like the retailers who plan far in advance for Black Friday and Cyber Monday, employers should also take this opportunity to look over their agreements to determine ̶ in advance ̶ the best corporate strategy for enforcement. Some agreements include a devaluation of company stock for departing employees. Some agreements forbid competition for a defined period of time within a restricted area. Keep in mind that states tend to strictly interpret non-competition clauses. When terms are not clear, courts usually give the benefit of the doubt to the employee, favoring free competition whenever possible. Just like with Black Friday and Cyber Monday, it’s difficult to know in advance whether or not your strategy will pan out. To give your company the best shot at success, it makes sense to look over your options in advance.

Burr & Forman attorneys in nine offices throughout the Southeast are available to consult with you on these issues, to develop your strategy, and to work with you when the need to enforce arises.

Filed Under: Florida, Non-Compete Agreements Tagged With: , , , , ,

Halloween Scares and Non-Compete Agreements

October 27, 2014 by

Halloween is always a great time for adults and children. Just think about it, for at least one night we intentionally abandon every notion we teach our children about taking candy from strangers, not acting deceptively, not scaring people unnecessarily and otherwise not acting like little hellions. Indeed, we encourage the opposite. Scary little monsters will roam my neighborhood seeking free candy from strangers who often try to frighten them. Under the pretense of nonchalance, parents will watchfully keep a respectful distance from all front doors as their children boldly explore what an unknown witch or werewolf might hand out as “trick” or “treat.”

And so it goes this season all around our great nation.

And so it goes in many an employment agreement as well. Many of our clients require their employees to execute a non-competition agreement as part of their continued employment. While not all states favor agreements that restrain trade (some essentially disallow non-competition agreements altogether), Florida has detailed statutes spelling out the requirements of a valid non-competition agreement and many cases considering the issue to help all parties involved determine how best to deal with a departing employee.

What remains unclear is whether or not the non-competition agreement in force is a “trick” or a “treat” to either the former employer or to the former employee, or to neither. The answer is that it depends on the circumstances. Florida law recognizes that under certain circumstances an employer has the right to protect its trade secrets, its customers and its remaining employees from the competition of departing employees. While this sounds as if it solely favors the former employer, under many circumstances the situation is ̶ to keep with the theme ̶ more tricky. Often the customers whom the former employer seeks to insulate prefer to continue to work with the former employee. We’ve seen circumstances where customers of the former employer actually pull their business because the former employer has initiated legal action against a former employee pursuant to a seemingly enforceable non-competition agreement.

So what is an employer to do? Remember Halloween. Even when it’s seemingly okay to “trick,” sometimes it’s better to offer a “treat.” In a recent matter, the former employer had a stock repurchase agreement in force for departing officers and managers. The repurchase agreement had a formula that discounted the share value for departing employees. The former employer also informed the departing employee that it intended to enforce the (rather restrictive) non-competition agreement. However, when the former employers’ customers complained about losing the person with whom they had forged a professional relationship, the former employer opted to enter into a consulting agreement with the departing employee rather than to initiate a lawsuit. The benefits of this were many and obvious. First, the former employer could mollify its customer and maintain continuity on the job. However additional benefits also resulted. For one, the former employer could both keep tabs on the former employee (and its customers) and at the same time profit from the continued relationship. A supplemental benefit was that it made any violation of the parties’ agreement other than through the consulting agreement seem all-the-more egregious. In that way, if the matter ever made its way to a courtroom, at least the former employer could argue that it took every possible step to act reasonably.

You might find yourself in a circumstance when there are better business alternatives available than simply initiating litigation to enforce a non-competition agreement. Even though it’s the Halloween season, don’t be scared. At Burr & Forman we have lawyers in offices throughout the Southeast that are experienced with these issues and able to advise you in even the most scary situation.

Filed Under: Florida, Non-Compete Agreements Tagged With: , , ,