In the United States, every state has slightly different legislation when it comes to restricting competition.
A good example is a non-compete agreement, which is widely considered by legislators as a legitimate manner to prevent unfair competition between an employee and the employee’s former company for a certain period after their employment.
States with a more regulatory approach (e.g., California) tend to limit the enforceability of non-compete agreements, based on the viewpoint that this type of restrictive covenant is too severe.
Other states like Florida consider non-compete agreements enforceable, as long as the clauses contained in the contract are considered reasonable. Regardless, some legislators believe that, in certain situations, non-compete agreements can violate state and federal antitrust laws.
In this article, we provide you a guide on non-compete agreements and antitrust laws.
Non-Compete Agreements vs Antitrust Laws
For those unaware, antitrust laws refer to several federal and state government laws that regulate the conduct and organization of business corporations. Among the most prominent are historical marks such as the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914.
Since its inception, antitrust laws were created to protect economic freedom and promote fair competition in the American market. While many believe that antitrust laws are a mere act of punishment towards big companies and corporations, this is not the case.
On the other hand, non-compete agreements are contracts between parties (typically, an employer and an employee), in which one of the parties agrees not to compete with the other party within certain conditions (length of time, geographic area, etc.).
While non-compete agreements are still a valid choice for entrepreneurs in Florida, they must be drafted carefully to avoid any violation of antitrust laws.
Could a Non-Compete Agreement Violate an Antitrust Law?
Nowadays, the most common antitrust violations are agreements that severely restrain competition and efforts to acquire a monopoly. Depending on the situation and the clauses contained in the contract, a non-compete agreement could fall into the first category.
Firstly, antitrust laws were designed to protect the market from monopoly, which is characterized by the absence of competition and fair play between different companies.
In this sense, it is extremely important to be careful when drafting a non-compete agreement, as such a restrictive covenant could lead to low competitiveness and abusive restraints within a certain area.
Undoubtedly, employers need to safeguard their legitimate business interests (e.g., trading secrets, business lists, etc.) from the competition. However, any non-compete agreement containing terms too restrictive will not contribute to the economic environment as a whole.
Reasonableness is the Key
In Florida, non-compete agreements are considered enforceable by law. Accordingly, courts tend to be more business-friendly, as long as the clauses contained in the agreement meet the reasonableness criteria.
To be considered valid and enforceable in Florida, a non-compete agreement must be reasonable in scope.
The first factor to be considered is the length of time of the contract. Any restraint 6 months long or less is considered presumably reasonable, while restraints with more than 2 years are presumed unreasonable.
However, some courts in Florida have enforced restraints up to 2 years on some occasions, without even questioning the agreement’s reasonability. In this sense, it is crucial to consider the singularities and circumstances associated with each case.
Secondly, it is essential to pay attention to the geographic area restricted in the agreement. In Florida, this clause can be determined by county, distance, or geographic area. Employers should not put restrictions on areas in which they do not conduct business activities.
There are situations in which the employees subject to a non-compete agreement have certain skills or competencies that are scarce. Consequently, the monopoly of these skills or competencies would hurt the interest of the general public.
To illustrate the situation, let us say there are only 10 doctors within a certain geographic area. Five of these doctors signed non-compete agreements with different private hospitals and clinics.
Then, an immense flood comes, which affects the local population negatively and drastically increases the need for medical care.
In such a case, any of these non-compete agreements would not be enforceable, given the urgency of the interest of the general public in the service provided by the doctors.
We Can Help You to Deal with Non-Compete Agreements in Florida
Dealing with a non-compete agreement in Florida may be complex and time-consuming. Hence, do not waste time with uncertainty.