1. USING Restrictive COVENANTS TO BENEFIT RETENTION Daniel E
USING Restrictive COVENANTS TO BENEFIT RETENTION Daniel E. Harrell Employment Litigator

2. OVERVIEW
Examples of Restrictive Covenants Importance for Retention Purposes Parameters for Restrictions Enforcement Questions

3. WHAT IS A RESTRICTIVE COVENANT?
Non-Compete Agreements Non-Solicitation Agreements Confidentiality Agreements Intellectual Property Agreement Any other Restriction on Post-Employment activity

4. EXAMPLE - NON-COMPETE AGREEMENT
“During my employment and for a period of two (2) years following voluntary or involuntary termination of employment with the Company, I agree that I will not, directly or indirectly, enter into employment with, perform services for, or obtain any ownership interest in a Competing Business (hereinafter defined) that engages in activity or is located within One Hundred (100) miles of the Company's principal place of business.”

5. EXAMPLE - NON-SOLICTATION AGREEMENT
“For a period of two (2) years following voluntary or involuntary termination of employment with the Company, I agree that I will not, directly or indirectly, Call upon, solicit, divert, take away, accept or conduct any business from or with any current, former or prospective clients, or any of the suppliers or subcontractors, of the Company with whom I have had any business-related contact during my employment with the Company, for the provision of services or products similar to those provided or contemplated to be provided by the Company.”

6. EXAMPLE - CONFIDENTIALITY AGREEMENT
“At all times, both during and after my employment, I will keep in confidence and trust all such Proprietary Information. I will not, at any time, without the Company’s prior written permission, either during or after my employment, disclose any Proprietary Information to anyone outside of the Company, or use or permit to be used any Proprietary Information for any purpose other than the performance of my duties as an employee of the Company. I will cooperate with the Company and use my best efforts to prevent the unauthorized disclosure or use of any and all Proprietary Information.”

7. IMPORTANCE OF RESTRICTIVE COVENANTS
Retention is a major issue for employers
33% of New Hires Quit within Six Months
35% of Employees are Looking for New Jobs
Nearly 50% of Employees would take a new job for a nominal pay increase
25% of Employees are High-Retentions Risks

8. IMPORTANCE OF RESTRICTIVE COVENANTS
Retention is a major issue for employers
93% of Millenials will leave for “role” changes
70% of High Retention Risk Employees believe they must leave to advance careers
$11.0 Billion lost annually to employee turnover
Ease of Transition has flattened the market

9. IMPORTANCE OF RESTRICTIVE COVENANTS
Employee Retention Costs
The Cost of Recruiting
$3,500 for $8/hr position
The Cost of Training
Average of 40 hrs of training per year
The Break-Even Point
5-6 Months before New Hire Reaches Full productivity

10. IMPORTANCE OF RESTRICTIVE COVENANTS
How do Restrictive Covenants Help?
A recognized investment in one another.
Consequences to Employee for Transition.
Additional Comfort in Expending Training Costs.
Less concern over training a competitor’s work force.
Quicker engagement for both employer and employee.

11. Parameters for Restrictions
The Law does not allow a blanket restriction on competition.
Restrictions must be limited to protect “Legitimate Business Interests”
Restrictions must be reasonable in time, geography and lines of business
Restrictive covenants must be in writing and signed

12. “Legitimate Business Interests”
Fla. Stat. § (B)(1) establishes non-exclusive list of “Legitimate Business Interests”
Trade Secrets
Confidential Non-trade Secret Information
Customer, Patient or Client Goodwill
Substantial Relationships with Specific Prospective or Existing Customers
Extraordinary or Specialized Training

13. “Legitimate Business Interests”
Most restrictive covenant disputes involve disagreements over this issue.
There is a lot of gray area in the law
Example: Physicians and Prospective Patients
Example: Physician and Referral Sources
An employer cannot restrict someone from doing something that they are not doing.

14. Temporal and Geographical Scope
Temporal Scope
Less than six months is per se reasonable
More than five years is per se unreasonable
For most non-ownership positions, two years will be upheld as reasonable
Geographical Scope
Highly dependent on Work Area
Must demonstrate need for an expansive scope

15. Enforcement of Restrictive covenants
Damages
Equitable Relief
Temporary or Permanent Injunction
Legal Relief
Monetary Damages
Attorney’s Fees
Tortious Interference Claims

16. Enforcement of Restrictive covenants
Common Defenses:
Overbreadth
Unclean Hands
Prior Breach of Contract
Failure to Pay, Change of Benefits, etc.
Harassment or Discrimination

17. Enforcement of Restrictive covenants
Temporary Injunction Phase
A Temporary Injunction is Designed to Protect Status Quo
Courts consider a temporary injunction to be an Extraordinary Remedy
Asking the Court to put former employee out of work pending a full-blown trial
While Florida law is favorable to enforcement, some judges tend to have difficulty putting people out of work

18. Enforcement of Restrictive covenants
Temporary Injunction Phase
Must Prove Four Elements to Obtain Temporary Injunction:
IRREPARABLE HARM
LACK OF ADEQUATE REMEDY AT LAW
SUBSTANTIAL LIKELIHOOD OF SUCCESS ON MERITS
ENFORCEMENT DOES NOT CONTRADICT PUBLIC POLICY

19. Enforcement of Restrictive covenants
Statutory Presumptions
Irreparable Harm is Presumed
Contract Enforcement is Public Policy
Individualized economic hardship can not be considered by the Court
Contract Construction Rules requiring a narrow interpretation are inapplicable

20. Enforcement of Restrictive covenants
Beyond Litigation
Strong Negotiation Tool
Protection of Client/Customer Interests
Most Competitors will recognize their risks of supporting an employee in violation
Specter of Attorney’s Fees – Tail Wagging the Dog

21. SUMMATION
Restrictive Covenants are an important tool all companies should consider implementing.
Litigation over these issues is on the rise, so be careful with your own hiring process.
If you find yourself in a position where a restrictive covenant issue is looming, contact counsel early.

22. Daniel E. Harrell CLARK PARTINGTON 125 W. Romana Street, Suite 800
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