Good morning!
Florida recently passed a new bill on a hotly debated legal issue: non-compete bans.
Several states, including California, North Dakota, and Wisconsin, currently have outright bans against these agreements. Others, including Oregon, Washington, and Illinois, only allow them under certain conditions. And last year, the Federal Trade Commission (FTC) moved to ban the use of non-compete agreements nationwide, before a district court stopped the agency from enforcing the rule.
But new state legislation in Florida would make it easier for employers to impose noncompete agreements on their workers, including lower-level staffers, and create challenges for employees who try to challenge these agreements in court.
“I was shocked when I first saw the act,” says Michael Elkins, partner and founder of MLE Law and a licensed attorney in Florida, who’s been helping companies navigate these agreements for more than two decades. “The state is going in the complete opposite direction of what others are trying to accomplish.”
On April 24, the Florida legislature passed the Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act. If Governor Ron DeSantis signs it, which he is expected to do, the law would go into effect at the beginning of July.
Under previous Florida law, non-compete agreements were enforceable if the company asking workers to sign them could provide legitimate business reasons why they were necessary. If these agreements were challenged in court, a judge would rule on whether or not that was actually the case.
But under the new law, any company with employees who are “reasonably expected” to earn more than twice the annual mean wage of the county where the business is located can subject workers to non-compete agreements. The law would also apply to independent contractors, and out-of-state employees. The average annual wage in Florida is currently around $66,456, according to the Bureau of Labor Statistics.
It also makes it much more difficult for workers to fight to have these non-compete agreements thrown out. Employees will have to prove in court that they’re not in a competitive role, or that the agreement violates the CHOICE act in some way. And that won’t be easy to do, Elkins says, as workers can’t use any kind of confidential company information to make their case.
If the CHOICE Act passes, it will cement Florida as the most non-compete-friendly state in the country, says Elkins. And while he agrees that there are legitimate reasons why company leaders should put them in place, the law could also allow more companies to impose non-compete agreements on working class employees, and create major employment headaches for them later on.
“I think non-competes are very helpful to businesses when you're dealing with top people like CEOs and CFOs, those who know where the bodies are buried, so to speak,” says Elkins, “But they’ve absolutely been abused and were never intended to prohibit regular workers from changing jobs.”
Brit Morse
brit.morse@fortune.com
