Last Updated on December 9, 2022 by Anda Malescu
Can you enforce a non-compete agreement in the United States? The simple answer is yes, you can enforce a non-compete agreement in the United States but this depends on the law of the state governing the non-compete agreement and the exact language of the contract.
For example, let us say a company in Florida called FLORIDA BUSINESS EXPRESS focusing on dance instruction and located in Miami provided its employees at the start of employment with a non-compete agreement. The language of the non-compete agreement the employees signed provided that “for a period of twenty-four (24) months after the date of termination of Employee’s employment with FLORIDA BUSINESS EXPRESS, for any reason by either party, either voluntarily or involuntarily, Employee may not directly or indirectly own, engage in, operate, manage, purchase, invest in, lend money to, lease or sublease to, or have any other interest in any business focusing on dance instruction within an area of 10 mile radius from FLORIDA BUSINESS EXPRESS. ” In addition, the non-compete agreement had an applicable law provision stating that the agreement “shall be interpreted, construed and governed by and in accordance with the laws of the State of Florida.”
Now, we will analyze whether one can enforce the non-compete agreement above. First, in order to determine the state law that governs the non-compete agreement it is important to look at the applicable law provision. In this case the contract is governed by Florida law and this means that Florida law will be used to interpret the agreement, even if the parties live or the agreement is signed in a different state. The effect of an applicable law provision in a contract (also known as choice of law) is that the contract is governed by the law chosen.
After determining the law of the contract, it is important to determine how is a non-compete agreement treated under that specific law – in this case Florida law. Under Florida law, a non-compete agreement can be enforced by an employer as long as the agreement is reasonable with regard to time and geographical area, and the non-compete agreement protects a legitimate business interest of the employer as defined by Florida Statute 542.335. Generally, restrictions of up to two years and covering areas where the employer actually does business will be considered reasonable by a court. In addition, to determine whether a non-compete agreement can be enforced is important to also review the common law of the state.
Finally, after determining what law applies and how the law treats non-compete agreements, we must apply it to the particular situation. In this case the two year restriction on competition will likely be deemed reasonable by a Florida court; under Florida restrictions over two years are presumed unreasonable. As for the geographic scope in Florida, “reasonable” means the areas in which the employer does most of its business. Therefore, the geographical limitation in our sample non-compete agreement above is likely reasonable under Florida law. In Florida, if a non-compete is unreasonable, the agreement will still be enforceable, but the court might cut back the time or area to which it applies.
However, do not forget that non-compete agreements are treated differently in other states and can be unenforceable; enforceability and the limits on enforceability vary from state to state and a non-compete agreement may be enforceable in one state but unenforceable in another state. In our particular case, an employer may be able to enforce the non-compete agreement in Florida, but the same non-compete agreement will likely not be enforced in California. Generally, California does not permit non-compete agreements to be enforced as against public policy and changes in the law as of 2018 provide additional protections to employees seeking to avoid enforcement of a non-compete agreement by their California employer.
As you can see from the discussion above answering the question “can you enforce a non-compete agreement in the United States?” is complex and requires knowledge of contract law and state laws governing non-compete agreements. If you have found yourself in this complicated area of law, dealing with the relationship between non-compete agreements and the statutes that protect you, contact us, your business lawyers in Florida, to assist you with your non-compete agreement.
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