How Non-Compete Agreements Can Violate Antitrust Laws

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In a recent post, we provided some general do’s and don’ts for employers planning on using non-compete agreements to protect their legitimate business interests. Broadly speaking, there are several requirements for employers to meet in order for a non-compete agreement to be enforceable in Florida (an employer-friendly state).

The main reason these requirements exist is to ensure that employers are able to compete in a fair economic environment. Otherwise, non-compete agreements might often be found to be in violation of state and federal antitrust laws. The broad purpose of antitrust laws are to prevent anti-competitive measures enacted by companies that exert significant control over the market.

What are Non-Compete Agreements?

To provide some background, non-compete agreements are contracts between parties in which one of the parties agrees not to directly compete with the other party within a specific timeframe or geographic area. These agreements are usually referenced in the context of employment and contractor agreements, but they can also apply to buyers and purchasers of business assets.

Because non-compete agreements naturally restrict trade, they must be carefully constructed so they do not violate antitrust laws. These agreements must be considered reasonable in scope in order to be valid and enforceable.

What are some ways that non-compete agreements can be found unreasonable and unenforceable?

  • The time frame in which the agreement is said to be in effect is unreasonably long. There is no statutory time limit, but non-compete agreements that carry terms longer than two years are skirting the line. A rule of thumb for the time frame is six months to a couple of years.
  • A non-compete agreement only applies between two particular companies. Two businesses that are leaders in their industry might agree not to lure employees from each other’s company. Any time two competitors have an exchange that restricts free trade, you can bet the Federal Trade Commission or another agency will be interested.
  • The employees subject to a non-compete agreement have specialized skills or competencies that are scarce. Let’s say only a handful of physicians in a state have the ability to perform a groundbreaking medical treatment for lupus. If one of these physicians were to leave a practice that provided this service, patients would see a large percentage of their options for this service disappear. The ones who remain could then raise prices against a helpless public. That is a somewhat dramatic example, but it illustrates what could happen when non-compete agreements apply to niche areas.

Trembly Law Can Help Get Legally Enforceable Non Compete Agreements In Florida

The bottom line is that despite each non-compete antitrust case being fact-specific, there are a number of ways in which these agreements can violate antitrust laws. Civil or even criminal penalties could result. Trembly Law Firm is passionate about helping small business owners craft legally enforceable agreements and contracts that help grow profits and avoid costly litigation. Can we help your company? Call us at 305-985-4581 to discuss your options today.

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