Waning Support for Non-Compete Agreements in Florida?

The State of Florida has been a longstanding proponent of noncompete agreements. In 1996 the Florida legislature enacted the current non-compete statute, 542.335 Florida Statutes, which governs all noncompete agreements entered into after July 1, 1996. Due to some of the extreme provisions in this statute, Florida is considered to be one of the most “employer-friendly” states in the country.

Florida’s statute expressly provides that noncompete agreements will be enforced as long as “such contracts are reasonable in time, area, and line of business,” and the employer is able to prove “the existence of one or more legitimate business interests justifying the restrictive covenant” and the “contractually specified restraint is reasonably necessary to protect the legitimate interest.” While these provisions are common and reasonable, the statute also includes more extreme provisions that are, without question, designed to protect employers. Specifically, the statute precludes a court from considering any “individualized economic hardship that might be caused to the person against whom enforcement is sought.” Additionally, the statute precludes any contract provision that “requires the court to construe a restrictive covenant narrowly, against the restraint or the drafter of the contract.”

Criticism of Florida’s Noncompete Statute by Other States

While Florida is considered to be very “employer-friendly,” other states such as California, Illinois and New York are on the other side of the spectrum and are considered to be very “pro-employee.” In fact, noncompete agreements are actually precluded in California except when they are executed in connection with the sale of a business. Courts in these states, as well as Alabama and Georgia, have been especially critical of the more extreme provisions in Florida’s noncompete statute. Courts in these states have gone as far as refusing to enforce choice of law provisions in employment contracts that require the application of Florida law because Florida’s noncompete statute violates their public policy and sense of conscience.

Questions Raised by Courts in Florida

Despite the criticism from courts outside the State of Florida, courts within Florida have consistently enforced Florida’s noncompete statute. However, two recent court decisions have raised doubts as to whether courts in Florida will continue to wholeheartedly enforce its noncompete statute, especially the more extreme provisions in the statute. First, in 2016 a federal court in the Middle District of Florida addressed the propriety of issuing a preliminary injunction to enforce a noncompete agreement. See Lucky Cousins Trucking, Inc. v. QC Energy Resources Texas, LLC, 223 F. Supp. 3d 1221 (M.D. Fla. 2016). The court held that it was appropriate to consider the harm to the employee when issuing the injunction, citing the 11th Circuit’s decision in TransUnion Risk & Alternative Data Sols., Inc. v. McLachlan, 625 Fed.Appx. 403 (11th Cir. 2015). While it could be argued that this opinion is limited to when a preliminary injunction is being sought by the employer, clearly the court decided not to follow the black letter of Florida’s law which precludes such consideration and does not distinguish between the type of relief being sought by the employer.

In September 2017, the Florida Supreme Court addressed Florida’s noncompete statute in White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC, et al, 226 So.3d 774 (Fla. 2017). While the Florida Supreme Court did not directly address the statute’s more extreme provisions in its decision, the Court issued a lengthy opinion for the purpose of providing clarification and guidance to lower courts within the state. Specifically, the Florida Supreme Court noted that contracts in restraint of trade are generally unlawful and Florida’s noncompete statute is a “carve out” of this general prohibition. The Florida Supreme Court instructed lower courts, pursuant to the language in the statute, to actively modify noncompete agreements that are overly burdensome and only grant the relief “reasonably necessary” to protect the employer’s interests. The Florida Supreme Court noted that trial courts were in the best position to apply the noncompete statute based upon the facts in each individual case.

While the Florida Supreme Court did not specifically instruct lower courts to consider the impact of the restriction on the employee when they analyze the various cases before them, the Court referenced an employee’s “inalienable right to work”, as protected by Florida’s constitution. The Court also quoted language from another court in Florida which held the statute should be enforced in a way that does not inflict an “unduly harsh or oppressive result on the employee.” These comments seem to suggest that trial courts should consider the potential hardship on the employee while analyzing the noncompete agreements at issue in their cases, which is prohibited by the express language of the statute.

What is the Status of Florida’s Noncompete Statute Now?

Florida’s noncompete statute is still valid, but there is now legitimate uncertainty as to how Florida courts will enforce noncompete agreements with extreme or harsh penalties directed towards employees that violate the terms of their respective agreements. While it is still too early to say what courts will deem “reasonable” or “unreasonable” when it comes to restrictions on employees’ future employment, the two recent cases addressed above seem to signal a softening of Florida courts’ willingness to enforce any and all noncompete agreements regardless of their terms. Instead, there will be a “case-by-case” or “individualized” analysis performed by trial courts in Florida on each noncompete agreement employers seek to enforce.

Recommendations

LegalStandard.com recommends that employers should have any existing or future noncompete agreements reviewed and evaluated by an experienced attorney to determine the likelihood courts will enforce the terms of the agreements. It is critical that employers have this analysis performed prior to trying to enforce their noncompete agreements in court.

LegalStandard.com can review a noncompete agreement for as little as $295.00 or draft a new noncompete agreement for $495.00.