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Employers – Non-competition and Confidentiality Agreements Are Tremendous Tools to Protect You Business

By Darryl R. Richards | Categories: Labor & Employment, Litigation | August 2014

You work tirelessly to develop your customer, client or patient base and to create relationships with vendors.  You meticulously protect your financial information, your customer lists, your vendor lists, your confidential treatment protocols or other confidential business information.  And then, one of your long term and most trusted employees leaves the company.  All of your customer relationships and confidential information walks out the door with her.  Unless she signed a non-competition and confidentiality agreement, she could take your customer or patient relationships and confidential information to your competitor down the street.  Without well-crafted agreements in place, it may be time to panic.

Under Florida law, non-competition and confidentiality agreements designed to protect legitimate business interests are enforceable.  The question is not whether you can enforce those agreements; the question is to what extent will a court enforce it?  Under Florida law, a non-competition agreement is enforceable only to the extent reasonably necessary to protect legitimate business interests.  For instance, are you protected if your former employee can compete with you, but not call on your clients for the restricted period of time in your agreement?  If so, your former employee can still work for your competitor down the street or form her own company while not calling on the limited number of clients that she dealt with while employed by you.  In some cases, that is a terrible result.  Your former employee could establish her business, accept referrals from your existing clients and then take your existing clients after the restrictive period ends.

If your existing clients or patients are your best referral sources, it may be devastating to allow your former employee to start a new business even if she cannot service your existing clients during the restrictive period.

To avoid that outcome, you must prove to a court that to protect your legitimate business interests your former employee cannot compete with you in any manner.  To do that, your non-competition agreement needs to be well crafted and designed to protect other business interests in addition to your patient or client relationships.  First and foremost, your non-competition agreement should contain a non-exclusive list of business interests it is designed to protect.  Of course, customer, client or patient relationships are interests every business seeks to protect, but the agreement should also protect confidential information such as profit margins, vendor identity, vendor pricing, business plan, profit margins, specialized treatment or diagnostic methods or protocols and similar information that would be valuable to your competitors.

In a well-crafted non-competition agreement, the employee acknowledges that the information is highly confidential and would be of great value to a competitor.  Since it is impossible to remove that valuable information from your former employee’s mind, the most reasonable means to prevent its use is to prohibit that employee from competing with you.  Now, you are in a position to argue to a court that simply preventing your employee from providing services to your clients while competing for other business is not enough to reasonably protect your legitimate business interests.

In virtually every case in which an employer seeks to enjoin a former employee under a non-competition agreement, the employee contends that the employer failed to honor its contractual or other obligations to the employee.  Under the law, if the non-competition agreement is contained within a document that has obligations owed to the employee, the employee can argue that you are not entitled to relief because of a prior breach of the agreement.  If your non-competition agreement is well crafted, you can substantially undercut that defense and avoid delay in enforcing your non-competition agreement.  To avoid such spurious defenses, it is imperative that your non-competition agreement is identified as an independent agreement that is not dependent upon the performance of any other obligations, contracts or promises.

There are also many steps to protect your company when you learn a trusted employee is leaving.  For instance, you should notify the departing employee in writing not to delete any emails, contacts or information from her business computer.  Then obtain all passwords necessary to access the business computer.  If you suspect your former employee is competing after she leaves, you can then access her business computer that may show she was sending confidential information to third parties or to her home computer.  That kind of information is extremely valuable to establish the need for temporary injunctive relief to stop unfair competition.

There are many other things that you can do to make enforcement of a non-competition agreement far more likely.  If your agreements are well-crafted, they are tremendous tools to protect your business from former employees who try to take your hard work and relationships for themselves or for your competitors.  At the time your former employee decides to leave or shortly thereafter, you can demand confidently that she honor her non-competition and confidentiality agreements.  If she takes those well-crafted agreements to her attorney, he will have to tell her that under Florida law they are enforceable and that if she violates them, a court will enjoin her and award damages and attorney’s fees.  With well-crafted agreements and appropriate actions when an employee leaves, you may never have to file a lawsuit to enforce their terms.

 


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