My Favorite pages

 

What's this?remove

 
  • Sign in to use the “My Favorites” feature.
 

Connect with us on:

X Email this page:


OK Cancel



Should You Sign a Non-Compete?

Gavel
Non-compete agreements are uncommon in Florida. However, as the market changes, sales associates might be asked to sign one.

When you joined XYZ Real Estate years ago, you didn’t think twice when the broker asked you to sign a non-compete agreement. But now that you’ve decided to go to work for another brokerage in the same geographic area, your former “employer” says the clients at his brokerage are off limits and cites the non-compete agreement bearing your signature.

What’s Enforceable in Florida?
Although non-compete agreements can be enforceable, litigation to determine their validity and enforceability can be expensive and time consuming.

Before 1987, courts questioned the enforceability of contractual restrictions on post-employment competitive conduct against “independent contractors.”

After the Florida  2nd District Court of Appeal ruled that a non-compete clause wasn’t enforceable against an independent contractor (see Amedas Inc. vs. Brown, 505 So. 2d 1091 [Fla. 2d DCA 1987]), the Florida Legislature revised the controlling statute to make non-compete and non-solicitation agreements fully enforceable.

Florida law is clear that, in the absence of any contractually agreed-upon restrictions, a real estate sales associate is free to compete with his or her former broker/brokerage (i.e., “employer”) as soon as the “employment” ends (when the sales associate has moved his or her license to another firm).

Under Florida law, written restrictions on post-employment competitive activity (i.e., non-compete and non-solicitation agreements) are governed by Statute. The focus of this discussion is Section 542.335, Florida Statutes, which governs restrictions signed (or renewed) on or after July 1, 1996.

Florida courts almost universally enforce several kinds of restrictive covenants. If you’re thinking about leaving your current firm and competing with your former broker/brokerage you should be alert to the precise wording of your “restrictive covenants,” the litigiousness of your soon-to-be former “employer” and the level of risk involved in challenging your contractual restrictions.

Sales associates should do their best to avoid signing a restriction of any kind. However, if you sign an agreement containing one or more restrictions on post-employment competition, leave the company for a competitor and violate one or more restrictions, what must the former employer establish to make a case?

Under Section 542.335, Florida Statutes, a restrictive covenant is enforceable in Florida if it’s in writing and signed by the person against whom the restriction may be enforced; if one or more “legitimate business interests” support it; and if it’s no broader than necessary to protect the demonstrated business interest(s).

Legitimate Business Interests
Section 542.335, Florida Statutes, recognizes five legitimate business interests: (1) trade secrets, as defined in the Florida Uniform Trade Secrets Act, Chapter 688, Florida Statutes; (2) valuable confidential business or professional information that doesn’t qualify as a trade secret; (3) substantial relationships with prospective or existing customers or clients; (4) customer or client goodwill associated with an ongoing business or professional practice, by way of trade name, trademark or service mark; and (5) a specific geographic location; a specific marketing or trade area; or “extraordinary” or “specialized” training. Here’s a closer look at various restrictions:

1. Employee Piracy Restrictions
Many “restrictive covenants” prohibit sales associates from soliciting to hire, or hiring, employees currently employed by their former broker/brokerage. If a sales associate hires away a former coworker with whom he or she had a supervisory position or personal relationship, Florida courts generally enforce that restriction.

2. Geographic Restrictions
Several Florida appellate courts have questioned the effectiveness of geographic restrictions. For now, though, sales associates shouldn’t be surprised if a former broker/brokerage seeks enforcement of geographic restrictions.

3. Client Relationships
If the former employer can identify its “prospective or existing” clients and establish that it developed “substantial relationships” with them, the former employer will likely secure temporary or preliminary injunctive relief against the sales associate from soliciting or accepting business from those clients.

4. Training
New licensees, especially those who have received formal, in-depth training, may be found to have received “extraordinary” or “specialized” training sufficient to support enforcement of a broad restrictive covenant.

This article was written by Thomas T. Steele, managing shareholder with Steele, Watson & Benner P.A. in Tampa. He can be reached at tsteele@steelelawgroup.com.