Restrictive covenants in employment contracts are provisions that impose limitations on the employee. These restrictive covenants include the non-compete agreements, non-solicitation agreements and non-disclosure agreements.
Non-Compete Agreements
Non-compete agreements limit what an employee can and cannot do before and after the employment period. Under Florida law, non-compete agreements are presumed to be valid and enforceable if they are reasonable with regard to time and geographical area; and the restraints imposed are reasonably necessary to protect legitimate business interests.
Non-Solicitation Agreements
A non-solicitation covenant typically involves a party’s promise not to solicit another party’s customers for a specified period of time. Such agreements can be used to protect an employer from a former employee steering away the employer’s customers into a related business opportunity. Under Florida law, an employer is deemed to have a legitimate business interest in prohibiting the solicitation of its customers.
Non-Disclosure Agreements
Non-disclosure agreements, also known as confidentiality agreements, classify information that is to be kept confidential. By law, a nondisclosure agreement must be reasonable and necessary for protecting a legitimate business interest; and limited in scope and duration. Courts have enforced non-disclosure restrictions against former employees whose positions in new employment using the former employer’s confidential information, constituted unfair competition.
When negotiating restrictive covenants that restrain the ability to compete or obtain alternative sources for goods or services, it is worth considering the impact that a viral outbreak like COVID-19 could have on business operations and the ability to obtain temporary or permanent relief from those restrictions. The use of a force-majeure clause may be warranted.
Black’s Law Dictionary states that the force majeure clause “is meant to protect the parties in the event that a contract cannot be performed due to causes which are outside the control of the parties and could not be avoided by exercise of due care.” A force majeure clause can transform a party’s contractual obligations and liabilities; and allocate risk between the parties when an unanticipated event makes performance impossible or impracticable. A force majeure clause in an employment contract may permit an employer to suspend an employee’s services without compensation for the duration of the force majeure.
Where no force majeure event is specifically defined in the contract terms, it is left up to the courts to determine the parties’ intentions and meaning behind the general wording and inclusive phrases. Given the current unprecedented circumstances of COVID-19, the courts are likely to be more lenient in the interpretation of that which constitutes a force majeure, even where no such event is specifically defined within the contract itself.
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