Expiring NonCompete Contracts

noncompete contract


A non-compete contract can expire before an employee stops working, if the contract has a termination date. This was the case in 2005 when Prime Management Group tried to enforce a contract against their employee, Douglas Gray. They had an employment contract with a restrictive covenant that was otherwise valid under Florida Statute § 542.335. Gray v. Prime Mgmt. Grp., Inc., 912 So. 2d 711, 713 (Fla. Dist. Ct. App. 2005) see also Sanz v. R.T. Aerospace Corp, 650 So. 2d 1057 (Fla. 3d DCA 1995).

The contract contained a non-compete provision as well as a non-solicitation agreement. The length of the restriction was for 18 months, which would typically be a valid length of time under § 542.335(1)(d)(1). However, the contract itself was for a definite period of time, five (5) years. It was not set to auto renew. In fact, the terms of the employment contract stated it would terminate unless extended by an agreement.

The court said that because the contract was not renewed, it terminated, by its own terms after the five year period. Then, when an additional 18 months of non-compete went by, the period of the restriction was over. So, the employee was free to compete.

There is one very important fact in this case that creates a danger. The contract was for more than a year. So, by law (the statute of frauds) it must be in writing. There have been many cases, with similar facts where the contract was for one year or less and the court found that those contracts auto renewed by mutual assent of the parties. However, here, where the contract was for longer than a year, it could only be renewed in writing.

So, the non-compete and non-solicitation clauses were unenforceable.