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Friday, May 3, 2013

Non-Compete Agreements Can't Be Used to Prevent Competition

Whether you work in the copy room or in a corner office, you may have been presented with something called a Non-Competition Agreement. Or maybe it was called something sneakier, like a Confidentiality Agreement or Intellectual Property Agreement. Whatever it was called, it said you can't work for a competitor of the company for a year or two after you leave.

If you haven't been forced to sign one yet, beware. They're all the rage with management these days. Physicians, managers, executives, professionals and employees are often given the choice: sign or be fired.

While companies claim all kinds of reasons why they want a non-compete agreement from their employees, there's only one reason they really want it: to prevent a competitor from luring you over to work for them. They want to do everything they can to inhibit and prevent competition. But they will almost never admit that's the real reason.

Why not? Because preventing competition is the one reason that will never, ever justify a non-compete agreement.

While every state has different laws regarding enforceability of noncompetes, most allow them in some form or other. I'll use Florida's as an example, since I'm most familiar with it.

Florida law says:
542.18 Restraint of trade or commerce.Every contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful.
 This law is similar to the Federal equivalent, the Sherman Antitrust Act, which makes all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade illegal. There are both civil and criminal penalties for violations of the Sherman Act and the Florida antitrust law.

The Florida noncompete statute is a very specific exception to the antitrust laws. It says, in part:
542.335 Valid restraints of trade or commerce.
(1) Notwithstanding s. 542.18 and subsection (2), enforcement of contracts that restrict or prohibit competition during or after the term of restrictive covenants, so long as such contracts are reasonable in time, area, and line of business, is not prohibited. In any action concerning enforcement of a restrictive covenant:
 
(a) A court shall not enforce a restrictive covenant unless it is set forth in a writing signed by the person against whom enforcement is sought.
 
(b) The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.
 
The statute sets out some things the legislature considers legitimate interests, such as trade secrets, substantial relationships with customers and client goodwill. But preventing competition is not a legitimate interest to protect.

If your employer doesn't have a truly legitimate interest to protect, then they are violating antitrust laws by enforcing or trying to enforce a non-competition agreement. Unless you're the holder of the company's secret recipe, you might want to talk to an employment lawyer in your state about defenses you have to your noncompete obligations before you decide you have no choice but to step out of your industry for a year or two.

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