On October 25, 2016, the White House issued a call to action urging states to reform their non-compete laws. The call to action acknowledges that non-compete agreements are appropriate in certain circumstances, (for example, to protect trade secrets), but expressed the view that employers are, in many instances, using non-compete agreements merely as a means to limit workers’ abilities to take higher-paying jobs, and to reduce workers’ bargaining power with their current employers. The call to action also expressed the view that non-compete agreements ”also serve to reduce innovation and entrepreneurship by preventing workers from starting their own businesses.”
To be sure, non-compete agreements are a means of limiting employee competition with a former employer, and Florida is certainly employer-friendly when it comes to enforcing non-compete agreements. (Non-compete agreements are enforceable under Florida law when they are used to protect a legitimate business interest – including, but not limited to, non-public customer information, sales information and trade secrets – over a limited geographic area and for a limited period of time.) The call to action does not appear to seek the elimination of existing laws in every state that will currently allow enforcement of non-compete agreements. Instead, the focus seems to be on making certain non-compete agreements are not being used unfairly and in a way not supportable under existing state law.
In her Department of Labor Blog regarding the call to action, Sharon Block cites to Jimmy John’s sandwich makers in New York who were required to sign a non-compete agreements that would prevent them from working for another business that sold sandwiches. (It is virtually certain that a Florida court would refuse enforcement in such a case. Assembling sandwiches at Jimmy John’s is done openly and in front of in-store customers who can easily see the assembly process and, if they choose, can attempt to mimic it at home. There is nothing proprietary there to protect.) The real concern that is addressed by the call to action, according to Ms. Block, is the wide-scale use of non-compete agreements as a means of intimidating employees into not leaving jobs to compete with their employers because they were made to sign a non-compete agreement that is unenforceable. This is a concern because lower paid employees – say, under $40,000 annually – who are presently being required to sign non-compete agreements very likely lack the sophistication and financial resources to understand their rights relating to whether the non-compete agreement is enforceable. Ms. Block cites to statistics suggesting that well over 4,000,000 Americans may fall into this category.
Florida employers with the ability to establish legitimate business interests to protect need not be alarmed by this call to action. But Florida employers who overreach in terms of requiring employees to sign non-compete agreements, on the other hand, need to rethink their approach in this regard. (In the Jimmy John’s example cited above (and in Ms. Block’s Blog) the New York Attorney General’s office investigated and was successful in requiring Jimmy John’s to end the practice.) Florida employers who are not certain whether they have legitimate interests to protect under Florida law would be wise to seek counsel on this question.