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A top executive recently visited the Miami office of labor attorney Mark Cheskin, wanting to know whether the noncompete agreement he had signed with his company had teeth. If enforceable, the agreement would restrict the executive’s ability to switch to a competitor. But the exec had done his homework before walking in the door. “He already had a list of 10 reasons why it wasn’t enforceable,” said Cheskin, a partner at Hogan & Hartson. That a layperson could cobble together a challenge to his noncompete agreement is a testament to the growing popularity of the covenants. The Internet is now crawling with suggestions on beating noncompetes in response to employers’ increased use of the agreements, which are designed to protect companies and their trade secrets from competition. Labor and employment attorneys say there has been a recent spike in the use of noncompete agreements and an increased willingness on the part of employers to enforce the contracts. Employees in all kinds of fields are being asked to sign them, ranging from modeling to used car sales. Noncompete agreements are used by companies to protect business when employees jump ship. The agreements typically prevent the ex-employee from working within a certain distance of the former employer for a prescribed amount of time. Labor and employment attorneys have noted a general increase in noncompetes since 1996, when Florida beefed up its law governing the clauses, and some have noted another slight uptick in the past six months. “More than anytime in my career, I’ve been drafting noncompete agreements,” Cheskin said. “I think the labor market is trying to tighten a little bit again, and some employers are trying to prevent their employees from getting poached.” Mark Zelek, managing partner at Morgan Lewis & Bockius in Miami, agreed that there has been a surge of interest in noncompetes, but cited a different reason. “I see more and more companies asking more and more employees to enter into them,” Zelek said. “We have more of a knowledge-based economy, and companies can’t afford to lose intellectual property or confidential or proprietary information.” ‘REASONABLE’ STANDARDS Although labor and employment attorneys have their differing theories on what’s behind the recent boom in noncompetes, most agree that the genesis was 1996, when the state Legislature passed a new version of the restrictive covenant law. Before 1996, a judge could enforce a noncompete if the agreement was “reasonable” and if it was not “harmful to public health, safety or welfare.” That version of the law was open to wide interpretation and was generally seen as favoring employees. In 1996, the Legislature revamped the law, creating a more specific standard for the enforceability of noncompete agreements. The law created standards of reasonableness for the amount of time a noncompete could be in effect, and a list of business interests that can be used to justify a noncompete. Florida law also allows for blue-lining in noncompetes, allowing a judge to lessen the terms of a noncompete without tossing the whole agreement. As a result of the 1996 change, Florida became one of the nation’s strictest states in enforcing noncompete agreements. California and Georgia are commonly seen as the states with laws that make it the most difficult for employers to enforce noncompete agreements. Employers use noncompetes to protect trade secrets, which employees might provide to their new employer, and to keep customers from following the ex-employee to their new company. The agreements are commonly used by companies with salespeople, who can siphon away customers, or by companies with complex and sensitive trade secrets, such as technology or pharmaceutical firms. Last month, Maryland-based information and technology recruiter Teksystems filed a lawsuit in U.S. District Court in Miami against former employee Derek Spotswood. Spotswood had held several positions in the company, ranging from technical recruiter to business development manager. His noncompete specified that he could not work in a similar business within 50 miles of his office for two years after he left the company. Spotswood resigned in January, and Teksystems alleges that he took client lists with him to Eventus, a local competitor of Teksystems. The Maryland company is seeking an injunction and damages from Spotswood. The case is pending. GETTING AGGRESSIVE This type of case has become typical as companies more aggressively enforce noncompete agreements. Jim Gale, a partner of Feldman Gale in Miami, said when the economy sours, employers become more aggressive in enforcing noncompetes. Following the economic turmoil of the Sept. 11 terrorist attacks and the bursting of the technology bubble, companies have been more protective of their businesses. “When the market gets tough, the employers tend to do everything that they can to try to keep customers, and they make sure they are keeping their competitors at bay,” Gale said. “They are more likely to go after former employees for leaving, going to a competitor and taking business from the previous employer.” April Boyer, partner at Kirkpatrick & Lockhart in Miami, said job-hopping is more common than in years past, which also might contribute to the increasing use of noncompetes. “There’s just a general trend in society now — unlike 20 years ago — where people switch companies and employers more regularly,” Boyer said. And with increased enforcement, employees have taken note that their noncompete agreements are likely to be litigated. “I think generally there used to be a common belief that noncompetes weren’t worth the paper they were written on,” Boyer said. “As Florida has developed its law, and as courts have developed case law, it’s become more commonly known that if you have a noncompete, it’s enforceable.” As the use of noncompetes has increased, complex issues arising from their enforcement have arisen. The issue of assignability — or what happens to a noncompete when the original company is bought out by another — is one that attorneys are beginning to address more regularly. The issue came up in the recent high-profile case of Jack Cole, the veteran radio talk show host who lives in West Palm Beach. Cole originally signed a noncompete agreement with Fairbanks Broadcasting. But Fairbanks was later bought out by Clear Channel. The new owner fired Cole. The noncompete included a clause that it was not assignable to a new employer. However, Clear Channel tried to enforce the noncompete, claiming that the clause was ambiguous. Clear Channel won at the circuit court level, but the 4th District Court of Appeal reversed the lower court’s decision in October 2004, ruling that the language was not ambiguous. SPECIFICITY MATTERS State law on noncompetes varies. In Florida, judges can revise the terms of a noncompete without tossing the whole contract. The practice is called blue-lining. In other states, such as Georgia, if a noncompete is found to be out of line with the law, the judge can scrap the whole thing. Cheskin said crafting noncompete agreements that are impervious to blue-lining can be difficult, but there are ways to tailor agreements so judges won’t water them down. “Courts tend to be skeptical of noncompete agreements,” he said. “They don’t like to enforce them unless there’s been egregious behavior by the employee. Judges don’t like to put people out of work. That’s why it’s important to make sure noncompetes are carefully and narrowly drafted.” An overbroad agreement that prevents an employee from finding any work would likely be struck down by a judge, he said. So Cheskin focuses on areas that would truly threaten competition. “If you’re a retail superstore that has a noncompete with executives that says you cannot work for any competitor and if you have 30 product lines, your competitor is going to be any one in the country,” he said. “You have to tailor it. For example, if it’s a vice president with automotive supplies, narrow it down to competitors in that area. Then the judge is more likely to enforce it.” But such cases tend to be highly fact specific, and judges must evaluate the details of each case. “It’s a balancing act,” Zelek said. “It’s a weighing of what’s more important: freedom of employment or contractual rights.”

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