Proving a Non-Compete Agreement Without a Copy of the Agreement
By: Matt McLauchlin
The first requirement for an enforceable non-compete is a written agreement signed by the party against whom it will be enforced. There are no “verbal” or unwritten non-compete agreements. This seems basic enough and should be easily achievable. However, as in any case relying on the existence and actual execution of certain documents, this can be a heavily litigated issue.
For instance, many employers find themselves without an enforceable non-compete agreement because they have incorporated poor business practices and failed to ensure that their documentation was maintained and up to date. Employers might include non-compete clauses in an employee handbook or manual but may fail to have their employees actually sign or initial the pages containing the non-compete portion, with a signature appearing only at the end of the manual or in separate place. Questions therefore may arise as to whether the employee has actually signed the non-compete. Likewise, employers often make significant changes to their businesses’ corporate structures and may fail to modify or renew an employee’s non-compete to apply to the newly formed company of which the employee is now employed.
Employers also often misplace their fully executed non-compete agreements. If this occurs, the employer still has the right to seek to prove the terms of the written contract. Florida law permits the introduction of parol evidence to prove the contents of a contract where the proponent provides a satisfactory explanation that the original contract was lost or destroyed. § 90.954(3), Fla. Stat. (2008); Ins. Co. of State of Pa. v. Genova Exp. Lines, Inc., 605 So.2d 941, 942–43 (Fla. 3d DCA 1992). This is what occurred in Envtl. Services, Inc. v. Carter, 9 So. 3d 1258, 1267-68 (Fla. 5th DCA 2009). There, the employer sought to enforce a non-compete against its former employee but could not find the actual document the employee signed. The employee admitted signing some agreement but claimed not to be able to recall its terms. The employer was unable to produce the actual document or a copy of it. The employer claimed the document was lost and tried to establish its contents through an employee who testified that the employer only used one form of the agreement since 2005. The trial court refused to enforce the agreement against the employee, citing Section 542.335 and the requirement of a signed writing.
The appellate court reversed on the grounds that Section 90.954(1), Florida Statutes (2008), provides that the original of a writing is not required and other evidence of its contents is admissible when “all originals are lost or destroyed, unless the proponent lost or destroyed them in bad faith.” The court further noted that “[a]s a general rule, the loss or unintentional destruction of a written document does not affect the validity of the transaction of which it is the evidence, or the rights and liabilities of the parties to the instrument.” Id. The court also noted that “[w]hile it would be preferable to reestablish the written instrument in the manner authorized by section 71.011, Florida Statutes (2008), the failure to do so is not fatal to ESI’s attempt to enforce the agreement against [the employee] [], provided that the trial court is satisfied as to its essential terms.” Id. (citations omitted).
Often, an employer may have misplaced a copy of the executed non-compete but will have a blank form of its standard non-compete that it requires its employees to sign. In that case, the employer may and should use that form to establish the terms of the non-compete against the employee in conjunction with testimony of a witness competent to testify that the employee actually signed the document. See Action Fire Safety Equip., Inc. v. Biscayne Fire Equip. Co., 383 So.2d 969 (Fla. 3d DCA 1980) (holding that form non-compete agreement was properly admitted in enforcement action where employer established only one agreement was utilized and employee’s signature on agreement was witnessed and original was within control of adverse party).”); United Subcontractors, Inc. v. Godwin, No. 11-81329-Civ, 2012 U.S. Dist. LEXIS 67061, at *6-9 (S.D. Fla. Feb. 3, 2012) (in the event of lost written agreement, such agreement may be proved up via credible testimony, use of standardized forms, standard company practice, etc.).
PRACTICE TIPS:
Use a standard form of non-competition agreement when appropriate for similarly situated employees and retain your standard form. If you lose a particular employee’s form, you may still be able to prove the terms using a blank form containing all of the terms, supported by eyewitness testimony that the employee signed the document.
Save copies of the non-competition agreement signed by your employee in a safe place with multiple backups. Cloud based document management programs like Dropbox are always a great choice.
You do not need the “original” of the agreement for it to be enforceable, but an original is always preferred.
Make sure you have reliable, loyal witnesses who can testify that they have witnessed the employees’ signing of your non-competition agreements.
Have your employee initial each page of a non-compete agreement and sign it with witnesses’ signatures at the end.