Over the last year, there has been much written about the Federal Trade Commission’s proposed new rule banning the use of non-competition agreements in employment contracts. While the new rule has not yet been formally adopted and thus remains subject to further revisions, businesses in Florida that currently use or have historically required employees to sign non-competition agreements should carefully follow developments related to the final adoption of the proposed rule.
Florida businesses will be faced with a significant change in the law if the proposed rule is adopted as currently drafted. Florida currently has one of the most favorable legal frameworks in the country for enforcing non-competition agreements. As a result, many Florida businesses have adopted such provisions based on this favorable Florida law. The new proposed FTC rule, if adopted, will completely supersede Florida’s existing law favoring the enforcement of such provisions.
The newly proposed FTC rule can be summarized rather simply. It would ban the use of any non-competition agreement in any employment relationship between any employer and any employee. Moreover, the definition of employee in the proposed Rule includes independent contractors, interns, externs, volunteers, apprentices, and sole proprietors who provide a service to a client or customer. There would be no exceptions based on the legitimate business interests of the employer or the reasonableness of the geographic scope or duration of the non-competition provision. Simply put, any employer in Florida would be prohibited from requiring any employee to be subject to a non-competition agreement of any kind.
Banning the use of all non-competition agreements in future employment agreements would be a significant enough change in the law. But the proposed Rule goes further. It would require every employer who currently requires, or who in the past has required, employees to accept non-competition agreements to notify all current and former employees who remain subject to an existing non-competition agreement that those agreements are null and void and that the current and former employees are no longer bound by them. Failure to provide such notice within the time required by the FTC proposed Rule would, itself, constitute a violation of the new proposed Rule and could lead to legal action being brought against a non-compliant employer.
Given Florida’s current favorable treatment of non-competition agreements and the corresponding extensive use of such agreements in Florida, these changes in the law may have a particularly widespread impact on Florida businesses. It therefore behooves all Florida employers and employees to carefully follow the FTC’s announcements relating to the adoption of the proposed Rule and to consult with an attorney who can advise them of the extent of their rights and obligations under the final Rule once adopted. Employers who ignore these developments may find themselves subject to costly legal proceedings brought either by the FTC or their current and former employees seeking to enforce the new rule that is ultimately adopted by the FTC.