Month: February 2011

FLORIDA APPELLATE COURT REVERSES NON-COMPETITION INJUNCTION

Florida’s Fourth District Court of Appeal reversed, in part, a Broward Circuit Court temporary injunction involving a non-competition covenant between business competitors.  4UORTHO, LLC v. Practice partners, Inc., Physician Wellness Products, LLC, et. al., 18 So.3d 41, 43-44 (Fla. 4th DCA 2009).  The injunction prohibited “soliciting any practices which are current or prospective clients” of the plaintiff, a business that provides orthopedic physicians and their practices with administrative support in managing their worker’s compensation prescription claims receivables and other services.  The appellate court held the injuction was, in part, “vague or overbroad,” citing Angelino v. Santa Barbara Enters., LLC, 2 So.3d 1100, 1104 (Fla. 3d DCA 2009) (reversing entry of temporary injunction because vague language rendered the injunction overly broad).  The appellate court also directed the trial court to apply a time restriction to its order.

Under Florida law, to establish that a non-competition agreement is lawful, a party must plead and prove the existence of one or more legitimate interests that justify the restrictive covenant.  Once the proponent of the injunction has established that the restraint is reasonably necessary to protect a legitimate business interest, the burden shifts to the opposing party to establish that the agreement is overbroad or otherwise not reasonably necessary. 

Although the trial judge has broad discretion to fashion a temporary injunction, the contractual terms as well as Florida law restrict the breadth of the injunction.  In this case, the trial court’s order did not place limits on the reach of the injunction.  Even lawful competition could have been prohibited by the trial court’s injunction.

Attorney Peter Mavrick advises management regarding various problems they encounter with employees, including issues involving restrictive covenants, employee compensation, misconduct, performance problems, demotion, and termination.  Mr. Mavrick also has successfully represented many employers in litigation in Florida state courts and federal courts, including trial and appellate proceedings.  Mr. Mavrick regularly studies changes in federal and Florida labor and employment laws, including legal trends affecting the interests of management.

RECENT FLORIDA APPELLATE CASE HOLDS NON-COMPETE COVENANT NOT NECESSARILY INVALIDATED BY FAILURE TO PAY WAGES

The recent Third District Court of Appeal opinion in Reliance Wholesale, Inc. v. Godfrey, 2010 Fla.App.LEXIS 19459 at * 9 (Fla. 3rd DCA December 22, 2010), held that where a non-competition covenant is drafted as an “independent covenant,” as distinguished from a “dependent covenant,” a material breach defense premised on the employer’s alleged failure to pay wages is not a viable defense.  This is an important case.  A common defense to the enforceability of non-compete covenants is based on the employee’s contention that the employer failed to pay wages due; and on that basis, the employer committed a material breach of contract that invalidated the non-competition contract.  See, for example, Cordis Corp. v. Prooslin, 482 So.2d 486, 490 (Fla. 3rd DCA 1986).  However, the Reliance Wholesale case explained that Florida law limits the applicability of the material breach defense to “dependent covenants.”  The defense is not applicable to “independent covenants.”  The non-compete clause in Reliance Wholesale stated in pertinent part: “The covenants … shall be construed as agreements independent of any other provision in any other agreement … [and] the existence of any claim or cause of action of Employee against … [Employer], whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement of this Agreement.”  Id. at  *9.  The Third DCA explained: “We therefore hold that, as a matter of law, Godfrey’s asserted defense–that she is excused from performance of the non-compete provision of the 2005 Agreement based on Reliance’s prior breach–is not a valid or ‘viable’ defense to the issuance of a temporary injunction in this case.  Thus we hold that the trial court erred by concluding that Reliance failed to establish that it has a substantial likelihood of success on the merits.”  Id. at *9-*10.

This is an important case for lawyers who draft non-compete contracts.  Careful drafting can insulate a non-compete clause from attack when it matters most, i.e., when an employer needs to enforce a non-compete clause.  The case is also important for litigators who need to overcome an employee’s assertion of material breach for failure to pay wages.

Attorney Peter Mavrick advises management regarding various problems they encounter with employees, including issues involving employee compensation, misconduct, performance problems, demotion, and termination.  Mr. Mavrick also has successfully represented many employers when current or former employees threaten legal action.  Mr. Mavrick regularly studies changes in federal and Florida labor and employment laws, including legal trends affecting the interests of management.

ATTORNEY PETER T. MAVRICK OBTAINS DISMISSAL OF RACE DISCRIMINATION/HARASSMENT CASE

Attorney Peter Mavrick recently obtained dismissal of an employee’s federal and state law claims for race discrimination, hostile work environment, and retaliation against a medium sized corporation.  The employee’s lawsuit followed the EEOC’s issuance of a right to sue letter against the employer corporation.  The employee contended that the employment termination was based on race, even though the employer had clearly documented problems with the employee’s performance.

In this difficult economy, it is important to recognize that any employment termination may result in a future EEOC charge of discrimination or possibly a lawsuit.  Terminated employees often have difficulty finding suitable replacement employment, and sometimes look to blame their former employers for their situation.  To protect against unnecessary legal problems, management should properly document performance problems.  This should be done even if terminating employment is not something the employer is considering at the moment.  Documenting performance issues is important to protect the employer’s interests in the event that termination of employment becomes necessary.  Performance reviews should reflect an honest appraisal of an employee’s performance, showing good and bad points.  The EEOC and the courts view employers more favorably when they possess evidence of timely and regular performance appraisals.

Attorney Peter Mavrick advises management regarding various problems they encounter with employees, including issues involving employee compensation, misconduct, performance problems, demotion, and termination.  Mr. Mavrick also has successfully represented many employers when current or former employees threaten legal action.  Mr. Mavrick regularly studies changes in federal and Florida labor and employment laws, including legal trends affecting the interests of management.

ELEVENTH CIRCUIT AFFIRMS SUMMARY JUDGMENT FOR SHUTTLE COMPANY’S DEFENSE TO OVERTIME WAGE CASE

Abel v. Southern Shuttle Services, Inc., 620 F.3d 1271 (11th Cir. 2010), affirmed summary judgment for a shuttle company that was sued for overtime wages.   The shuttle company won the case because it showed it was not subject to the federal overtime wage law, i.e., the Fair Labor Standards Act, because of an exemption under the Motor Carrier Act.  The shuttle service transported passengers to and from the airport who were flying in and out of the State of Florida.  The company’s local transport of travelers had a “practical continuity of movement” with the overall interstate journey.  In addition, the airport shuttle drivers engaged in activities that directly affected the safety and operation of motor vehicles in the transportation of passengers on the public highways.  This Eleventh Circuit opinion was not an outlier.  It followed the reasoning of previous district court and appellate opinions in applying the motor carrier exemption to the Fair Labor Standards Act.

Attorney Peter Mavrick advises management regarding various problems they encounter with employees, including issues involving employee compensation, misconduct, performance problems, demotion, and termination.  Mr. Mavrick also has successfully represented many employers when current or former employees threaten legal action.  Mr. Mavrick regularly studies changes in federal and Florida labor and employment laws, including legal trends affecting the interests of management.

EMPLOYEE WINS CASE BECAUSE EMPLOYER DID NOT ASSERT ITS DEFENSE ON TIME

In a recent December 2010 Eleventh Circuit case, an employer had a favorable jury verdict overturned for failure to timely assert a crucial affirmative defense.  In Diaz v. Jagmar Management Group, LLC, 2010 U.S.App.LEXIS 25361 (11th Cir. December 13, 2010), the Eleventh Circuit reversed a jury’s verdict that the employee was exempt from the federal overtime wage law under the “administrative exemption.”  The employer did not identify the administrative  exemption as an affirmative defense in its answer.  In the 14 months before trial, the employer never moved to amend its answer to include the administrative exemption, nor did it raise it during discovery.  The appellate court stated: “If there were a classic case of waiver, this is it!”

This was apparently an otherwise winnable case for the employer.  But it appears there was a failure of appropriate legal research at the early stage of the case, and that apparent error was not avoided by catching the error during the 14 month discovery process.

A lesson of this case is not to presume that the case will settle and thereby refrain from conducting appropriate legal research and analysis at the early stages of the case.   In this case, the employer apparently did not carefully re-examine its legal defenses during the discovery process and instead waited until just before trial to attempt to assert the defense.  The trial judge even allowed the employer to assert the defense at trial, and on that basis the employer won the case at trial.  But the case did not end there.  The employee appealed. 

The appellate court concluded that this was a mistake by the trial judge because the employer waited too long to identify the administrative exemption affirmative defense.  The employer was required to assert its legal defense well in advance of trial to avoid unfair surprise to the employee’s attorney.

Overtime wage cases can be very simple if they settle at early stages. However, sometimes the employee demands compensation that the employer has no obligation to pay and is unwilling to pay.  If there is a valid affirmative defense, be cautious and assert it early in the case.

Attorney Peter Mavrick advises management regarding various problems they encounter with employees, including issues involving employee compensation, misconduct, performance problems, demotion, and termination.  Mr. Mavrick also has successfully represented many employers when current or former employees threaten legal action.  Mr. Mavrick regularly studies changes in federal and Florida labor and employment laws, including legal trends affecting the interests of management.