In a free-market system, competition is healthy and beneficial to consumers, encouraging innovation and competitive prices. In general, the government prefers to encourage, rather than restrict, competition. However, under Florida contract law, there are some situations where businesses can restrict their employees, contractors, business partners or others from competing with them in within a certain time frame and geographical areas.
Restrictive covenants are agreements that protect a business by restricting an employee, contractor, partner, or a specific person. There are six different types of restrictive covenants, and they are used in different situations.
Non-Compete Agreements
Non-compete agreements prevent an employee or consultant from doing business within a specific geographic location and for a specific amount of time as the employer. In other words, if you spend two years training your employee to do a good job for your company, he or she can't quit, set up shop across the street, and conduct the exact same business you do, using all that useful knowledge gained while working for you. Under Florida business law, these agreements are scrutinized yet they are enforced if they are geographically reasonable (generally limited to the employer's actual business territory), serve a legitimate business interest, and are not excessive in time frame (a Florida business lawyer can help you determine what time frame may be reasonable under Florida law).
Non-Solicitation Agreements
Non-solicitation agreements don't prevent former employees or consultants from setting up a similar business, but they do prevent them from soliciting the former employer's customers. Sometimes, non-solicitation agreements may also prevent the former employee from soliciting the employer's vendors, suppliers or employees. These contracts need to be specific and usually are limited to customers the employee worked with directly.
Non-Circumvent Agreements
Non-circumvent agreements are designed to avoid a “cut out the middle man” scenario. If two companies contract with each other to make or deliver a product to a third company, this agreement prevents each company from cutting the other out of the equation. So, if you buy parts from Acme Hardware for a product you make and sell to ABC Carpenters, Acme Hardware can't start making the same product with its own parts and selling directly to ABC Carpenters.
Confidentiality Agreements
Confidentiality agreements are used when a company wants to protect its sensitive data from an employee who needs to see it in order to complete his or her job, or an employee who would generally have access to sensitive information of a business. For example, in order to manufacture products like laundry detergent, medication, or soda, someone at the plant needs to know the formula. A confidentiality agreement would prevent him or her from selling this formula to a competitor, or producing the same product.