Understanding Non-Compete Agreements in the State of Florida

What Constitutes a Non-Compete Agreement

A non-compete agreement, also called a non-competition agreement, is an essential part contained in employment contracts in many professions and industries, usually in the context of employers and employees. Essentially, the aim of a non-compete agreement is to ensure that the employee cannot take sensitive business information or trade secrets to a competitor. Usually, non-competes are used by employers in order to prevent individuals who once worked for them from later returning to the industry as rivals.
Most of the time, non-compete agreements include provisions that prevent employees from working in a similar profession or from starting a business that competes with the employer for a defined period of time within a defined geographic area . While these restrictions are often enforceable by law, there are legal limits to the restrictions a non-compete can place on an employee, which, if tested, may be able to be challenged in court. Florida courts will enforce a non-compete agreement so long as it does not place undue restrictions on an employee’s prospects for future employment.
Several criteria are considered by Florida courts as they pertain to a non-compete. Not all non-compete agreements are treated equally by the courts, which is why it’s imperative that you have an experienced legal counselor at your side. If you’re an employer, you need to construct the non-compete carefully so that it is enforceable should a dispute arise. If you’re an employee and you’ve had a non-compete agreement forced upon you, you need to understand its enforceability through the eyes of Florida law, and whether it may be challenged.

Florida’s Approach to Non-Compete Agreements

Florida has its own set of laws and statutes governing the application and enforcement of noncompete and covenant not to compete agreements with employees. In Florida, Chapter 542.335 governs non-competition agreements. To be enforceable under state law, a non-compete agreement in Florida must impose a restraint on a party only to the extent necessary to protect the legitimate business interest of the party seeking enforcement. What constitutes a legitimate business interest is highly fact specific. legitimate business interest include: trade secrets (legally protected intellectual property), valuable confidential business or professional information that would be useful to competitors, information concerning clients, prospective clients or customers or suppliers, goodwill associated with a specific business or when an employee has invested time and training in the specialized skills and knowledge in which the employee has no other practical use and is unlikely to transfer to another employer. The agreement should be reasonable in time and area restrictions. Florida courts have held that a restraint extending over a two-year period is reasonable. A geographic area restriction of up to 100 miles has been upheld. Some restrictions have been upheld as a specific city or county. Courts are more likely to regard an area outside the activity’s known market as an unexercised business opportunity rather than a legitimate business interest. If a noncompete covenant is found to be overbroad and thus, unenforceable, the law provides for severance of the overbroad provisions so that the remaining clauses are enforceable without having to terminate the entire agreement.

Essential Aspects of a Comprehensive Non-Compete Agreement

In addition to the requirement that the non-compete be in writing and signed by both parties, at a minimum a valid non-compete must contain the following:

  • Reasonable duration of restriction – in order for non-competes to be enforceable in Florida, a person must prove that the time limitation contained in the non-compete is reasonable. Florida courts look at the circumstances surrounding the employment relationship. Two years is often times a reasonable non-compete period.
  • Reasonable geographic restriction – Florida courts require that restrictions against competition be no broader in terms of geographic location than necessary to protect a legitimate business interest.
  • Legitimate business interest(s) – Florida Statute 542.335, which governs covenants not to compete states that "in determining the enforceability of a restrictive covenant, the court may consider the prior or subsequent commercial context, the actual or demonstrable business practices or achievements of the person seeking enforcement such as sales and customer contacts, the existence of threats to important business interests, and the extent to which the public interest is disserved by restrictions on competition." Id. Case law has been clear to define what constitutes a legitimate business interest.

Are Non-Competes Enforceable under Florida Law?

To be enforceable in Florida, a non-compete agreement must be "no broader than necessary to protect the legitimate business interests of the employer". Fla. Stat. § 542.335(1) (2014). The agreement must also be "reasonably necessary to protect such interests". Id. The following are some of the legitimate business interests deemed worthy of protection by the Florida legislature: "[T]he trade secrets of the employer[,] valuable confidential business information[,] valuable customer relationships[, and/or] customer goodwill." Fla. Stat. § 542.335(1)(b) (2014). Beyond stating the need for non-competes to be narrowly tailored, the Florida legislature (perhaps curiously) offered no guidance regarding the scope of non-competes. Florida courts interpreting non-competes have noted that s 542.335 "provides little guidance for judicial determination of what is reasonable." [See, e.g., Sw. Fla. R. Contractors, Inc. v. McQuagge, 113 So. 3d 68, 75 (Fla. 2d DCA 2013) citing SI Coach, Inc. v. Panter, 984 So. 2d 633, 652 (Fla. 4th DCA 2008).]
In fact, the Florida Supreme Court recently struck down a bright-line 2-year restriction for non-compete agreements of certain employees. See, e.g., White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 185, 187 (Fla. 2017) (holding that the statute "[does] not establish … a bright-line temporal limit for non-compete agreements"). In the absence of guidance from the legislature, Florida courts adopt either a "bright line" or "sliding scale" approach to evaluating whether a non-compete agreement is reasonable. The Supreme Court of Florida in White was careful to point out the inherent problems with both approaches, i.e., that more than a "broad brush" nor "microscope" analysis is required to determine if a non-compete agreement is reasonable. Id. In cases where there is an abusive contractual term, Florida courts will sometimes find the entire agreement invalid rather than sever any offending clause. See Whirlpool Fin. Corp. v. Severson, 348 So.2d 602, 605 (Fla. 3d DCA 1977); but see EA Consul. Corp. v. Cohen, 455 So.2d 387, 389 (Fla. 4th DCA 1984) (stating that a severance analysis is appropriate when the contract can be reformed without rewriting an essential provision). This approach may lead to fairness concerns, such as making one party pay for the other party’s overreaching in drafting their agreement.

Challenges Surrounding Non-Compete Agreements

When defending non-compete cases, I often see three common things my client argues to try to get out of the non-compete, or at least get it substantially narrowed.

1. The employer never gave "consideration" to the employee in exchange for signing the non-compete. Under Florida law, an employer must give to an employee something of value in exchange for entering into the non-compete agreement. So, if the client was hired on a day when the employer made it clear that signing the non-compete was a condition of starting the job, then no new consideration was given in exchange for that non-compete (the hiring was the consideration). That is no longer a defense since Florida’s Fifth District ruled in 2002 in TruGreen-ChemLawn v. Scott that a continued at-will employment relationship itself will be enough to meet the consideration requirement.
2. The terms of the non-compete are unreasonable in time or area. Florida Statutes explicitly require that non-compete agreements which restrict how long a person can compete after leaving their employment and the area they are prohibited from competing in be reasonable:

An agreement that has a restraint on trade or commerce is enforceable if it is reasonably necessary to protect the legitimate business interests of the person seeking enforcement… and if it is reasonable in time and manner.
The problem is when a judge or other decision maker thinks he or she has to agree with the employer when almost without exception the state agencies that address covenants not to compete like the Department of Business and Professional Regulation say most non-competes are enforceable. Unfortuantely, the general public and even most attorneys are not familiar with the case law. Fortuneatley, they have been held against that general popularity and the overzealousness of the agencies by appellate courts .
As a rule of thumb, the same district of the Fifth District Court of Appeals in Florida that handles TruGreen-ChemLawn also handled a case that was very bad news for employees. That case was Murex Anti-Corrosion Services, Inc., v. Modern Chem and Oil, 705 So. 2d 609, 610 (Fla 5th DCA 1998). The company prohibited its employee from doing business with anyone who bought or financed the purchase of any part or accessory sold by the company. The court held that not only was it unreasonable for the employer to ask for that but that the employers own actions made it clear he would support the opinions of everyone else in agreement with him.
Most importantly, assuming when looking at reasonableness, the employer does not come out with a consistent opinion, other decisions such as Goldsmith v. PNC Bank require that the employer go heavier than not listening to all the parties and peoples inputs. They have to be willing to listen and act on that input as well.

3. The employer’s legitimate business interest does not exist. Florida law requires that there be a legitimate business interest that is protected by the covenant, but does not specify what that legitimate business interest has to be. Appellate courts have required that the employer go beyond just having a policy that spells out what information is confidential and other similar things. In Amegy Bank, N.A. v. O’Donnell, 61 F. Supp. 3d 1320, 1344-46 (S.D. Fla. 2014), the bank had several things it claimed were legitimate business interests. The court went through a list and agreed that at least two were legitimate business interests, though it did not specify which two that was. It is certain that the list includes: (1) when the employee had trade secrets considered a legitimate business interest; (2) when the business had properly protected customer relationships that qualified as a legitimate business interest; and (3) an employer spent a significant amount of money and time building up a "goodwill".

Advice for Employers when Drafting Non-Compete Agreements

Employers wishing to protect their legitimate business interests in Florida should use a reasonable and enforceable non-compete agreement. Courts have broad authority to decide whether a non-compete agreement is fair and supports a legitimate business interest. As a result, employers should pay careful attention to several aspects of the non-compete agreement, including:
Legitimate business interest
In Florida, a covenant not to compete is not enforceable unless it is designed to protect one or more "legitimate business interests." A legitimate business interest includes an employer’s trade secrets (i.e., information that "derives independent economic value… from not being generally known") or information that has value to others because the employee has exclusive knowledge or access to it.
Contracts that unreasonably restrict employees’ rights to work are disfavored in Florida. Accordingly, employers should state as precisely as possible the information as to which the employer has a legitimate business interest. While the list of potential legitimate business interests is extremely broad, it should include certain categories without fail, such as:
Duration
To be enforceable, a non-compete agreement’s duration must be reasonable and must bear substantial relationship to the time period necessary for the employer to protect itself. Florida courts generally view one to two years as a reasonable duration, barring specific facts that support a longer duration. The time period should be agreed upon by the parties and the employer.
Geographic scope
The geographic scope of a non-compete agreement must relate to the activities to be restrained. In general, the geographic scope of non-competition clauses should be limited to the area in which the employer is engaged in business and to the area in which the employee worked during the time of employment. Employers need not include all places where the employer operates, but they should specify the geographic area in which the employee had actual or cumulative contact with customers or client accounts.
Scope of activity to be restricted
The scope of the restricted activity should be limited to what is necessary to protect the legitimate business interests of the employer. Employers should clearly state the activities that are to be prohibited, while disallowing activities that are incidental to the type of activity employers seek to restrict.
Consideration
Florida courts do not impose any special requirements that employers provide separate consideration for the non-compete agreements. Rather, as Florida Statute Section 542.335(1)(a) provides, courts will enforce non-compete agreements as long as the employer has provided a valid consideration, such as:
Non-competition agreements must be signed by the employee in order to be enforceable. Finally, non-compete agreements should be written clearly and unambiguously in plain and easily understood language.
Non-compete agreements are regulated under Florida Statute §542.335. This statute provides the terms of non-compete agreements that are enforceable if they comply with the statutory requirements. Florida Statute §542.335(1)(a) provides: A person seeking enforcement of a restrictive covenant shall plead and prove the grounds for issuing an injunction and restraints authorized by this section.. . . .A court shall not enforce a restrictive covenant unless the person seeking enforcement proves that the enforceable restrictive covenant is reasonably necessary to protect the legitimate business interest justifying the relief sought and that the restraint sought is no broader than necessary to protect such interest, and provided the person against whom enforcement is sought was given notice of any request for a temporary injunction.
The enforceable restrictive covenant must be supported by a legitimate business interest [as defined in Fla.Stat. §542.336(1)(b). [See Fla.Stat. §542.335(1)(c).] Florida law favors reasonable enforcement of non-compete covenants not to compete between employers and their employees during employment and thereafter.

Useful Information for Employees

Employing a common sense approach, employees should understand that a non-compete agreement is enforceable only to the extent that it is reasonable. Therefore, the strongest bargaining chip an employee has with respect to his or her future rights and freedoms is the ability to reject an unreasonable restriction upfront, before signing the non-compete. For example, if an employee knows, due to his or her employment history with the company, that the company only competes with a competitor in a single state, then that same employee should not be prepared to sign a five year non-compete that has worldwide application; especially, if the same employee knows that he or she will only be employed by the company in Florida. If the employee does not object to the unreasonable restriction before signing the document, however, the overarching presumption under Florida law is that the employee had no objection to the restriction and the same will be enforced by a court. A similar approach can be used in relation to the geographic scope of the non-compete. For example, if the employee has been informed by the employer that it has no offices in Chinese-capital city of Beijing , then the employee should not sign a non-compete related to competition in Beijing. Again, if the employee does not object to the location of the restriction, then that could be used against them in litigation. An additional area that employees should evaluate in relation to the reasonableness of the non-compete, is the time period for which they are bound by the non-compete. For example, if you have just started a new job or have only been employed by your employer for a very short period of time, you should not accept a non-compete that restricts you from competing for several years. If you are being presented with a non-compete at the time of hiring (or during your employment, for that matter), then it would make sense for you to try to negotiate the restrictions contained within the agreement, and whether to accept the restrictive covenant altogether. Finally, if you were presented with a non-compete after you were hired, it may very well be that your employer will try to enforce the provision regardless of whether you feel the provisions are reasonable or not. If you have any concerns as to the reasonableness of the restriction, you should seek the counsel of an attorney who is well-versed in the area of non-compete agreements.