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Prior material breach is a defense to a contractual claim when an employer breached an essential term of the contract.  The effect of this defense against enforcement of the non-compete agreement is that the employee can be released from his or her obligations under the contract. Because sexual harassment is strongly prohibited by both Florida and federal law, an employee may claim that sexual harassment may also constitute a material breach of the non-compete agreement. This issue also may arise when an employee claims to be constructively discharged from his or her employment because of alleged sexual harassment by a company officer or employee. Peter Mavrick is a Boca Raton non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

An example of this defense occurred in the case of Harrison v. Palm Harbor MRI, Inc., 703 So. 2d 1117, 1119 (Fla. 2d DCA 1997), in which Kathy D. Harrison (“Harrison”) worked for Palm Harbor MRI, Inc. (“Palm Harbor”) soliciting doctors to use Palm Harbor’s MRI equipment. Harrison signed a non-compete agreement during her employment with Palm Harbor. According to Harrison, the President of Palm Harbor sexually harassed her, which resulted in Harrison’s eventual resignation. She then was hired by Gulf to Bay Diagnostics, where she performed the same job duties soliciting doctors to use Gulf to Bay Diagnostics’s MRI equipment.

Palm Harbor contended that Harrison’s employment with Gulf to Bay Diagnostics was a violation of the noncompete agreement and filed a lawsuit against her seeking an injunction. At the evidentiary hearing on the injunction, Harrison did not present any evidence, but admitted that she had signed the non-compete agreement. She contended, however, that she had solicited business for Gulf to Bay Diagnostics because she considered the non-compete agreement void as a result of the sexual harassment of her by Palm Harbor’s President. The trial court rejected this argument and held that the sexual harassment claim did not void the non-compete agreement. The trial court further stated that there were other remedies for sexual harassment. Based on Harrison’s admission that she signed the non-compete agreement and her violation of it by soliciting MRI business for Gulf to Bay Diagnostics, the trial court entered a temporary injunction against her. Harrison immediately appealed.

Harrison argued that the trial court erred by not allowing evidence of the President’s sexual harassment, in support of her defense of prior breach of the non-compete agreement by Palm Harbor. The appellate court agreed. The appellate court held that the trial court’s observation that there are other remedies for sexual harassment, incorrectly assumed that breach of contract could not be one of them. The appellate court relied on the Florida Supreme Court of Byrd v. Richardson–Greenshields Securities, Inc., 552 So.2d 1099 (Fla. 1989), which held that workers’ compensation is not the sole remedy for an employee claims of sexual harassment. Byrd also held that it could not find that the “acts constituting sexual harassment were ever meant to fall under workers’ compensation…we have an equal obligation to honor the intent and policy of other enactments and, accordingly, may not apply the exclusivity rule in a manner that effectively abrogates the policies of other law.” Byrd emphasized that both the Florida and federal government committed to strongly outlawing and eliminating sexual discrimination in the workplace. Byrd further stated that:

The statutes, case law, and administrative regulations uniformly and without exception condemn sexual harassment in the strongest possible terms. We find that the present case strongly implicates these sexual harassment policies and, accordingly, may not be decided by a blind adherence to the exclusivity rule of the workers’ compensation statute alone. Our clear obligation is to construe both the workers’ compensation statute and the enactments dealing with sexual harassment so that the policies of both are preserved to the greatest extent possible.

Byrd v. Richardson–Greenshields Securities, Inc., supra.

Based on the holding in Byrd, Harrison v. Palm Harbor MRI, Inc. concluded that Harrison may have had an affirmative defense which the trial court did not allow her to present. The appellate court reversed the temporary injunction and remanded to the trial court for further proceedings to determine the viability of that Harrison’s sexual harassment claim. Harrison stated that a sexual harassment claim may serve as a defense to a material breach of contract, but not that it was a defense.  By contrast, in Variable Annuity Life Ins. Co. v. Laeng, 8:12-CV-2280-T-33MAP, 2013 WL 499982 (M.D. Fla. Jan. 2, 2013), a former employee alleged that the former employer materially breached the non-compete agreement when it allowed one of its employees to sexually assault and harass her, failed to investigate those claims, created a hostile work environment, and then retaliated against her by constructive discharge. The former employee contended that her obligations under the non-compete agreement were terminated. The district court stated that Harrison was not instructive because it did not opine on whether sexual harassment claims constituted a prior material breach. Laeng could not find any other case law to support that argument.

Peter Mavrick is a Boca Raton non-compete lawyer who has substantial experience with business litigation.  This article does not serve as a substitute for legal advice tailored to a particular situation.

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