NON-COMPETES & EMPLOYEE MOBILITY
Employees, independent contractors, and vendors are often required to sign restrictive covenant agreements, which can include non-compete, non-solicit, and non-disclosure provisions. Non-compete provisions typically seek to prohibit an individual from working in the same line of business within a certain geographical area for a time. Non-solicit provisions typically prohibit an individual from soliciting customers, prospects, or employees. In the context of a sale of a business, restrictive covenants may prohibit a seller from starting a similar business.
Non-compete, non-solicit, and non-disclosure restrictions are often included as part of an employment agreements, independent contractor agreements, shareholder and partnership agreements, stock and equity agreements, and in agreements for the sale of businesses, among other contexts.
WHY HIRE CANTRELL ZWETSCH
Cantrell Zwetsch, P.A. is one of the few firms nationwide that specializes in handling high-stakes restrictive covenant disputes and trade secret disputes. We routinely provide non-compete and non-solicit counseling and litigation services. Our clients range from entrepreneurs, sales producers, physicians and other health care professionals to c-suite executives and Fortune 500 companies.
We have experience across most industries and professionals, including staffing/recruiting, healthcare, hospitality, manufacturing, automotive, technology, financial services, and real estate.
Below is an overview of: (a) examples of restrictive covenant matters we handle; and (ii) frequently asked questions.
WHAT WE HANDLE
We are regularly retained to handle the following issues by individuals, including sales representatives, entrepreneurs, professionals, and management and non-management level employees:
- Assessing whether a non-compete or non-solicit is enforceable and, if so, the extent of its enforceability.
- Providing guidance on what actions would and would not violate a particular non-compete or non-solicit.
- Defending against lawsuits seeking to enforce restrictive covenant agreements, including handling injunction hearings.
Restrictive covenants can have life-changing implications on the lives of individuals who sign them. Assessing enforceability of restrictive covenants prior to changing jobs or starting a business is crucial. When lawsuits or threats of lawsuits are involved, effective non-compete counsel and defense can make the difference between career success and financial disaster.
With respect to businesses, creating and rolling out appropriate restrictive covenants and ensuring compliance with such agreements are mission-critical business needs. Businesses regularly rely on us to address the following types of restrictive covenant issues:
- Drafting employment agreements, independent contractor agreements and restrictive covenants for employees, contractors, and vendors.
- Strategizing on the choice of law and venue selection provisions for multi-state employers, as court enforcement of non-competes can vary significantly from state to state, as noted by the a U.S. Department of Treasury Report
- Providing practical guidance to companies on active steps they can take to ensure restrictive covenants remain enforceable, as well as preparing effective cease and desist letters for non-compliance.
- Assessing whether restrictive covenants were violated, or trade secrets were misappropriated.
- Providing guidance on detecting theft of proprietary business information.
- Counseling businesses on hiring individuals who have restrictive covenants or possess proprietary business information.
- Prosecuting legitimate claims of violating a non-compete or non-solicit agreement, trade secret misappropriate, and other claims relating to unfair competition.
FREQUENTLY ASKED QUESTIONS
It depends on the applicable state law and the context. In most states, a company that wants to enforce a non-compete or non-solicit agreement (which are both types of restrictive covenants) against a former employee or contractor must demonstrate:
- The agreement is in writing and signed by the person against whom enforcement is sought.
- The existence a legitimate business interest. The phrase “legitimate business interest” is a legal term of art, whose precise definition varies by state law. In most states, a legitimate business interest includes protection of (i) trade secrets or other confidential information that has value, (ii) substantial relationships with specific prospective or existing customers or patients, (iii) customer or patient goodwill associated with certain intellectual property, such as trade names, trademarks, service marks, trade dress, or associated with a specific geographic location, or (iv) extraordinary or specialized training.
- The restraint at issue, such as the non-compete or non-solicit, must be reasonably necessary to protect the legitimate business interest justifying the restriction.
There are also a few states, such as California, that consider non-compete agreements unlawful between an employer and employee, with limited exceptions.
The requirements a company must satisfy to enforce a restrictive covenant, as well as the defenses available to an individual, vary by state law. In general, however, there are many legal defenses against enforcement of a non-compete or non-solicit agreement. For example:
- Overbroad. The scope of the non-compete or non-solicit may be overbroad in geography or time.
- Not Competing. A business generally is unable to enforce a restrictive covenant against an individual who is not engaging in competitive activities.
- Unclean Hands. Some states will consider equitable defenses, which basically means a court will take into consideration unlawful or improper actions taken by the business seeking to enforce the agreement.
There are many other potential defenses. For more comprehensive information on how to defend against non-compete and non-solicit agreements, view our Insights article Best Practices for Defending Against Non-Compete Agreements
Legal remedies available to a business enforcing a restrictive covenant, such as a non-compete or non-solicit agreement, generally include:
- A temporary and permanent injunction
- Attorney fees and costs
- Monetary damages
Additionally, a business may be able to assert claims other than for breach of contract, such as tortious interference or statutory claims of unfair and deceptive business practice or unfair competition. Depending on the claims asserted, a business may be able to recovery treble damages or punitive damages.
If an individual subject to a restrictive covenant works for a new employer that is competitive with the former employer, then the former employer may also be able to sue the new employer for damages.
It depends on the governing state law. In most states, restrictive covenants, such as non-competes, non-solicits, and non-disclosures, are enforceable even if an employee signed the agreement after starting employment. The legal reasoning is that continued employment is considered sufficient consideration to the employee for the employer to have a valid contract. In some states, however, a restrictive covenant is not valid if signed after starting employment, unless the employer has satisfied additional requirements under the relevant state law.
What is a Temporary Injunction?
A temporary injunction stops a party from engaging in certain conduct – such as violating a non-compete agreement – until the final resolution of a lawsuit. When filing a lawsuit to enforce a non-compete agreement, often the former employer asks the court to immediately issue an injunction against the former employee or contractor who is competing.
In federal courts, a temporary injunction is called a preliminary injunction. Regardless of the name, the purpose is the same: to obtain an injunction during the pendency of a lawsuit.
A temporary injunction stops a party from engaging in certain conduct – such as violating a non-compete agreement – until the final resolution of a lawsuit. When filing a lawsuit to enforce a non-compete agreement, often the former employer asks the court to immediately issue an injunction against the former employee or contractor who is competing.
In federal courts, a temporary injunction is called a preliminary injunction. Regardless of the name, the purpose is the same: to obtain an injunction during the pendency of a lawsuit.
When looking for a non-compete lawyer, you are encouraged to compare the background of the lawyers you are considering. Consider subject matter expertise, educational background, past results, and what references say about their own experiences. We are glad to share references.
We handle all restrictive covenant disputes throughout Florida and Georgia.
