BUSINESS IN BROWARD

BUSINESS & LAW
By Paul O. Lopez

Routinely, employees in today's marketplace are "encouraged" to execute non-compete agreements with their employers. From the president of the company to the sales force, non-compete agreements are becoming the rule rather than the exception when it comes to employment relationships.

Candy Coating

Quote marks are apropos when using the word "encouraged" because employers often ante up minimum consideration (in the form of raises, perks, bonuses, continued employment, etc.) for the employee to sign the non-compete agreement.

This applies whether an employee is new to the company or has been on board for awhile, with the employer deciding to have the employee enter into a non-compete agreement.

Dilly of a Dilemma

Obviously, a prospective employee refusing to sign the non-compete agreement might not land the job. And an established employee might be perceived as both less than a team player and a candidate for the firing line. Either way, it's a classic Hobson's choice for prospective or present employees who have mortgages to pay and kids to feed.

Standing alone, a non-compete agreement can be an intimidating document. In its purest form, a non-compete agreement seeks to prevent an individual from working for a competitor of the employee's present employer for some period of time.

Handcuffing Talents

Ironically, this translates to mean an employee's marketability is crippled in the very industry in which he or she has acquired the most skills and expertise. By the time the non-compete period expires, the employee's market value could have diminished. Additionally, most non-compete covenants allow for the prevailing party to recoup their attorney fees and costs.

So, not only do employees who are considering violating a non-compete covenant face the prospect of paying their own legal fees and costs, but they may have to foot the bill for their employer's attorney fees and costs as well if they lose.

Will it Stick?

However, both employers and employees should understand that non-compete agreements are not always enforceable. Florida's legislature, for example, has specifically set forth the instances when non-compete agreements are enforceable.

Absent the scenarios provided by Tallahassee legislators where these agreements can be validly enforced, a non-compete agreement may not be worth the paper it is written on. Florida's legislature further provided that any non-compete covenant not supported by a legitimate business interest is unlawful and is unenforceable. The fact that the legislature did not make the above list exclusive obviously leaves an employer with some wiggle room and an employee with doubt about his or her legal position. This could prove stressful to an employer, to say the least.

Worker-Bee Relief

Recent trends in Florida law are to protect the employee and disfavor the enforcement of non-compete agreements unless the company can show direct harm to itself. Examples of direct harm include a former employee soliciting customers of the prior employer or using trade secrets of the prior employer for the new company. These would be instances in which the past employer can likely show loss revenue, profits, harm, etc. In such cases, an employer could likely convince a judge to enforce a non-compete agreement. Yet if the employer merely heads off to work for a competitor, but does not solicit customers or suppliers of the prior employer or otherwise directly interferes with the business of the prior employer, courts generally will not uphold non-compete agreements.

Once again, the problem for the employer, if an injunction is not entered, centers on the prospect of paying the employee's attorney fees, and costs as well as its own attorney fees and costs.

Cut to the Chase

Generally, cases involving non-compete contracts are disposed of quickly. Either a preliminary injunction is entered or it is not, and the parties then often resolve the other aspects of the case. Quite obviously, the nature of the resolution will depend on whether the employer or the employee wins at the preliminary injunction hearing.

If the employee wins, rest assured, that a request for attorney fees will be made and may be in order due to the posture of the case. If the employer wins, it is likely that the employee will have no ability to pay any attorney fees, and the employer will not be able to recoup the same.

In the end, an injunction may be entered against the employee, but the employer still will have to police the employee's activities, and that may prove problematic.

Paul O. Lopez is chair of the Labor and Employment at the law firm Tripp Scott. E-mail POL@trippscott.com or visit www.trippscott.com.