How long can a non-compete last in the United States?
A non-compete agreement can be a clause in a contract or an agreement on itself which prevents one or both parties of the contract from competing with the other party in certain ways. Usually, non-compete agreements are used in employment contracts. The employee normally agrees not to enter into competition with the employer during or after the employment ends. The article discusses the aspects of non-compete agreements and focuses on the topic ‘How long can a non-compete agreement last?’.
Non-compete agreements must be both fair and equitable for both parties and generally they require certain information in order to be legally binding. The details recommended to be included in a non-compete agreement are an effective date on which the agreement will begin, a reason for enacting the agreement, specific dates during which the employee will be barred from working, and others.
When determining whether a non-compete agreement is enforceable or not, courts will often balance the need to protect the employer’s legitimate business interests with any burden that enforcement of the agreement would place on the employee. In other words, courts will look at the reasonableness of non-compete agreement, factor that can be determined on two aspects – duration and scope. The reasonableness of the duration of the agreement depends on the specific circumstances of each case. The approach on the recognition and enforceability of non-compete agreements is not uniform among the states in the United States. As of 2018, non-compete clauses covered 18 percent of United States workers.
The enforceability of non-compete agreements in the state of Florida is quite common. Florida Statute lays out a rebuttable presumption for reasonable time limitations contained in non-compete agreements. Where a party seeks to enforce a non-compete agreement against a former employee, agent or independent contractor, the court “shall presume reasonable” any time period of six months or less. Likewise, non-competes in this category containing a time duration greater than two years shall be presumed unreasonable.
Additionally, for a party seeking to enforce a non-compete agreement against a former distributor, dealer, franchisee or licensee of trademark, the Florida Statute creates a presumption that non-competes are reasonable if made for a duration of one year or less, and that non-compete agreements for a duration of three years or more are unreasonable. Courts in Florida have established that a ten-year duration of a non-compete agreement applied to a seller of a business does not comply with the Florida Statute.
Even when a non-compete agreement is limited in duration, geographic reach, and scope, it will be enforced “only to the extent . . . necessary to protect the legitimate business interests of the employer.” Recognized legitimate business interests are generally identified as the protection of trade secrets, confidential information, know-how, goodwill and others.
On the other hand, in California, non-compete agreements are automatically void as a matter of law. As a result, non-compete agreements are not recognized or enforced in California. In Utah, non-compete agreements are enforceable, but any such agreement entered into after May 10, 2016 may not extend for a period of more than one year.
For more information, contact us, your business attorney in Miami, Florida or schedule a consultation. We can assist you in your legal needs and help you better understand How long can a non-compete agreement last?.
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