Who Can Be Subject to Non-Compete Agreements?

 Posted on October 14, 2022 in Business Law

Business contracts will include multiple different types of clauses and agreements that are meant to protect the interests of the parties. Non-compete agreements can be crucial for many businesses, and they can protect a company's trade secrets, confidential information, and relationships with customers and clients. While these agreements are typically used in employment contracts, they may be included in other types of agreements, and multiple parties may be subject to restrictions on their business activities or the types of work they can perform in a certain geographical area and for a certain period of time. By understanding when non-compete agreements may be used, businesses, employees, and other parties can make sure their rights will be protected, and they can address issues related to the enforcement of restrictive covenants.

Situations Where Non-Compete Agreements May Be Used

Multiple different parties may be subject to restrictions put in place by non-compete agreements, including:

• Employees - An employment contract may include a non-compete clause that prohibits an employee from quitting and then starting a competing business or going to work for a competitor. The non-compete agreement may also restrict an employee's ability to solicit customers or clients of the company. 

• Former employees - A severance agreement may include a non-compete clause that prevents a person who is leaving a company from engaging in direct competition, including working for a competitor or starting their own competing business. This will ensure that a person cannot use trade secrets or other insider information to engage in unfair competition.

• Independent contractors - A non-compete agreement may be used when contracting with an individual who will have access to trade secrets, confidential information, or other business information that could give them an unfair advantage if they were to start their own competing business. 

• Business partners - A non-compete clause may be used in a partnership agreement to prevent one of the partners from starting a competing business or engaging in business activities that would directly compete with the products or services offered by the partnership.

• Businesses - If two businesses are going to be working together, a non-compete agreement may be used to prevent one of the businesses from engaging in activities that would directly compete with the other business, such as by offering similar products or services. 

The restrictions placed on a person or entity by a non-compete agreement must be reasonable, and they must be necessary to protect a business's legitimate interests. They must generally be limited in scope, such as by preventing a person from engaging in competitive behavior in the region where a business operates or restricting them from working for a competitor for a limited period of time. A non-compete agreement must also provide a person with consideration, or something of value in return for agreeing to the restrictions. For example, an employee may receive wages and benefits, or a person who is leaving a company may receive severance pay.

Contact Our Broward County Non-Compete Agreement Lawyer

Non-compete agreements can provide essential protections for a business, but it can sometimes be difficult to enforce their terms. At The Elliot Legal Group, P.A., we can work with you to make sure your non-compete agreements will be enforceable, and we can help you address any violations that have affected your business. Contact our Surfside business contract litigation attorney at 754-332-2101 to set up a consultation and learn more about how we can assist you.

Sources:

https://www.investopedia.com/terms/n/noncompete-agreement.asp

https://smallbusiness.chron.com/non-competition-agreements-between-businesses-2838.html

http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0542/Sections/0542.335.html