New and existing employees are often asked to sign lots of paperwork when hired by a new employer. These include NDA and noncompete agreements, which have different purposes and enforcement rules. An employee’s grasp of the laws behind the paperwork is usually unclear until they plan to leave the company and are made aware of the compact they agreed to.
More than 25 million U.S. workers are bound by noncompete clauses. Use of these restrictions became so widespread that several states, including California, Wisconsin, and North Dakota, banned them. Noncompete agreements are strictly regulated in Oregon, Washington, and Illinois. The Federal Trade Commission sought to ban them entirely, but a judge would not allow a nationwide exclusion.
How Non-Compete Agreements Work
Noncompete and nondisclosure (NDA) agreements are often confused but they cover different aspects of employment. Here are the important differences:
- A nondisclosure agreement seeks to protect company secrets by forbidding workers to discuss aspects of their employment, such as company revenue, technology, plans, customer lists, and proprietary practices.
- A noncompete clause similarly protects a company’s secrets but is more onerous. It restricts an employee’s ability to switch jobs and work for a similar company or to start their own business in the same industry. Critics complain that these restrictions, which once applied only to top-tier executives, is used too broadly and negatively impacts the average worker’s ability to succeed in a career.
Once an employee signs a noncompete agreement, they must comply with the company’s requirements for a specific period of time after their employment ends. Other provisions often include:
- Not taking a job within the same field that’s within a geographic radius specified by the employer.
- Not working for a named competitor or partner business in the same industry.
- Not sharing knowledge of the industry learned while working at the previous employer.
The noncompete agreement must be justifiable, a legal test required for it to be enforceable. It should also enumerate the damages or penalty an employee faces for breaching the agreement.
What Does Florida’s Non-Compete Law Do?
Florida’s Choice Act (Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth) addresses the issue for employers in the state. It is likely to take effect July 1, 2025. It does not apply to healthcare professionals.
Unlike states that restrict the widespread use of non-compete clauses, Florida’s law enhances them for employees of specific salary levels. The Choice Act allows noncompete clauses for companies whose employees earn twice the annual mean wage of the county where the company is based. It applies to contractors who are not W2 employees and others who work remotely.
Before signing, prospective employees have up to seven days to consult an attorney and consider the implications of signing a noncompete clause. Another stipulation says employees must acknowledge in writing their receipt of protected information.
Most significantly, this law provides for:
- a post-employment term of up to four years during which employees are constrained from employment with a competitor in a specified geographic area.
- “garden leave” status for terminated employees. This is invoked by a court injunction sought by the employer. This clause requires an employee to stay away from the workplace for the remainder of their employment term while collecting a regular salary from the former employer. This status neutralizes their ability to start work for another employer as long as they are constrained by the employment agreement.
- “garden leave” employees to argue in court that their future work is in a sufficiently different field. If persuaded, a judge may release them from their noncompete term.
- employers to reduce the salary of “garden leave” status employees for engaging in forbidden competitive activity.
Find Out More About Florida’s Noncompete Law
How will the new law impact your employees, existing noncompete clauses, or your future business plans? Prepare your HR team by learning more about the Choice Act and other aspects of employment and business law by consulting WKFK Law.
