Non-Compete Agreements Rankle, but They Remain Enforceable in Many Instances

Non-compete agreements are among the most contested of contracts, perhaps because they are viewed both as unnecessary and as slightly un-American. Frequent comments heard by contract attorneys handling non-compete agreement disputes include “Who will gain if this agreement is enforced?” and “How can they stop me from doing my job and making a living?”

Earlier this month, a Court of Appeals in Tennessee went far in answering these questions when it resolved a Tennessee non-compete agreement case with a Florida connection.

In 2010, two executives began work at a Tennessee corporation. Each signed a contract stating that:

  • The executives would not compete with their employer anywhere their employer did business in the U.S. for two years
  • The executives would not engage in any business their employer was engaged in or [had] taken steps to be engaged in prior to the executive’s termination of employment
  • The contracts would be “construed under” and “enforced in accordance” with the … laws of the State of Florida

In 2011, both executives resigned, and then filed lawsuits in which they claimed that the non-compete contracts were void and unenforceable. Their former employer filed a counterclaim, and, eventually, the Court of Appeals decided that the non-compete agreements were:

  • Enforceable because they reasonably and necessarily protected the employer’s legitimate interests
  • Overly broad in scope: their primary purpose of preventing the formation of a competing business was not served by limiting business engagement options

The Court of Appeals also ruled that Florida law contravened Tennessee’s public policy as it pertained to this dispute therefore could not and did not apply.

This case illustrates that employers may still effectively protect their interests via non-compete agreements. However, the outcome of any dispute may be more assured with the knowledgeable and strategic counsel of an experienced contract attorney.

An attorney can determine the full range of protection that a non-compete contract can validly offer. For example, in addition to preventing the formation of a competing start-up, a non-compete agreement can protect valuable intellectual property. And by avoiding overly broad and unenforceable provisions, an attorney can help prevent conflicts and litigation. For more information regarding effective non-compete agreements, contact the law office of Manos &Alwine, P.L., at 305-341-3100.