Common Mistakes Businesses Make with Non-Compete Agreements

You might have non-competition agreements, also called non-compete contracts, with your employees that are not worth the paper they are written on. Businesses routinely have employees sign these agreements, without questioning whether they will be enforceable or not.

It is pointless to have agreements that do not accomplish what you set out to do, like protecting your trade secrets, keeping your customer list confidential, and preventing your employees from quitting and taking business away from you. A Florida breach of contract attorney can explain the common mistakes businesses make with non-compete agreements. The lawyer can also provide guidance on how to draft enforceable contracts. 

Having Existing Employees Sign Non-Compete Agreements

When you ask your current employees to sign documents that require them to do something or not to do something they have a legal right to do, you must offer them something of value in exchange. If you do not do so, the agreement is not enforceable on the grounds that the employee did not receive any consideration. The consideration must be meaningful, like a raise or a promotion.

You can require new employees to sign an agreement not to compete. It is best if you state in the agreement that the consideration on your side is your willingness to hire them.

Unreasonable Duration of Restrictions

Let’s say that your employee signed an agreement that prohibited them from competing against you for the next 50 years. A court would likely find that restriction unenforceable because it is unreasonably long. You can only restrict competition for as long as it is reasonable to protect your business interests. For instance, a six-month restriction is much more likely to be enforceable than a 10-year limitation.

Overbroad in Scope

The scope of restriction must not exceed the actual work performed by the employee. In other words, an airline pilot cannot be restricted from working in any capacity in the aviation industry. The scope of a non-compete agreement must be limited appropriately and reasonably. 

Unreasonable Geographic Limitations

The geographic territory restrictions must also be reasonable. You cannot restrict a salesperson from working for a competitor within a 500-mile radius of your company if the salesperson’s territory when working for you covered only your city.

Using a “Cookie-Cutter” Form

Using pre-fabricated forms designed to apply to everyone can be a mistake because no form fits everyone, just as no tuxedo fits everyone. You might think that you are saving a few dollars by buying an “off the rack” document. In reality, every dollar you spend on a generic non-compete agreement is a dollar wasted. Also, if you rely on a cookie-cutter document to protect your company, you could lose money and clients when a court finds the contract unenforceable. 

When determining the reasonableness of non-compete agreements, judges tend to ask themselves these questions:  

• Is the company being greedy by asking for more than they need from the employee? 
• Is the company trying to prevent the worker from being able to make a living without having to move across the country to do so? 

If a judge answers yes to either of these questions, the judge will likely find the agreement unenforceable. You can talk to a Florida business attorney about drafting non-compete agreements that will fit your situation and be enforceable. For legal help, get in touch with our office today, we offer a free consultation.