Many businesses use non-competition agreements to help ensure former employees do not use information they gained from the employer to benefit a competitor. While they can serve a valid business interest, non-competes also restrict future employment so there are strict requirements regarding when they can be used. In Florida, one area where they may be challenged is when a business tries to enforce a non-compete agreement against an independent contractor. If you are considering requiring or signing a non-compete, here are some important points to know.
What Are the Requirements for a Non-Compete Agreement in Florida?
A non-compete prohibits an employee from working for a competitor or starting a competitive business for some period of time and within a certain geographic area after employment ceases. To be enforceable in Florida the agreement must be:
- In writing and signed by the person against whom enforcement is sought;
- Necessary to protect the employer’s legitimate interests, such as to protect its trade secrets; valuable confidential information, substantial relationships with specific prospective or existing customers, patients or clients or other designated reasons;
- Reasonable in duration and geographic scope; and
- Reasonable as to the line of business restricted.
The burden of proof to demonstrate the above requirements is on the party seeking enforcement of the agreement. If they succeed, the burden of proof then shifts to the opposing party to show the agreement isn’t reasonably necessary, is overbroad or is too long in duration.
Is a Non-Compete Agreement Enforceable Against an Independent Contractor in Florida?
While non-competes are typically used for employees, an independent contractor may also be required to sign one. However, it can be more difficult for the employer to meet the requirements of an enforceable agreement because of the nature of independent contracting. Independent contractors often work for multiple clients and go from company to company. They also may focus on businesses within the same industry. In this way, the contractor develops niche expertise. As a result, a court will look carefully at the terms of the agreement to ensure it doesn’t unreasonably restrict the contractor’s ability to get future employment.
As discussed in the prior section, to be enforceable, the agreement must be necessary to protect the employer’s legitimate interests. Further, it must be reasonable as to duration, geographic scope, and line of business restricted. Florida law provides that with respect to non-compete restrictions on independent contractors, there is a presumption that 6 months or less is a reasonable length of time and more than 2 years is unreasonable. However, this presumption can be rebutted.
It is important to note that if the independent contractor is located in another state, the other state’s laws on non-competes may apply.
If an employee signs a non-compete while an employee and then becomes an independent contractor for the employer, the non-compete remains enforceable provided that the underlying agreement stated that any subsequent change in duties, salary or compensation will not affect the validity or scope of the agreement. In such a situation, the change in status from employee to independent contractor has no effect on the enforcement of the non-compete agreement.
What Is the Best Way for Businesses to Address Competition Concerns By Independent Contractors?
There are risks when using a non-compete with independent contractors. In some cases, the non-compete may be used as evidence that the contractor was actually an employee, not an independent contractor. That would mean the employer owes employment taxes, and the employee has additional rights such as the right to minimum wage, overtime, unemployment benefits, healthcare coverage and other benefits. As a result, depending on the risks to the business, another option to protect the employer may be to use a non-disclosure agreement in lieu of a non-compete. This can protect trade secrets and other confidential information without the problems of a non-competition agreement.
If a non-compete is necessary, it is essential that an experienced attorney review the work arrangement and draft the agreement to ensure that they clearly establish an independent contractor relationship.
It is also important to work with an attorney because of the complicated nature of non-competes. An agreement must be narrowly tailored to the situation and independent contractor to ensure it can be enforced. Notably, if you try to enforce the agreement and lose, you will have to pay the defendant’s attorney’s fees and costs and may be liable for money damages if you interfered with an employment relationship and the contractor lost a job. As a result, don’t rely on form agreements or ones you typically use for employees. Consult an attorney for help.
When Should You Contact a Florida Employment Attorney?
Employers should be proactive and contact a Florida attorney before hiring an independent contractor. If you are a contractor being asked to sign a non-compete, talk with a lawyer to understand your rights and for advice on negotiating the terms of the agreement.
Our Florida employment attorneys are experienced in non-competition agreements involving employees and independent contractors. Contact us to discuss your matter.
