Articles Posted in Employment Law

Published on: June 3, 2023

DEFENDING FLORIDA EMPLOYERS: SEXUAL HARASSMENT CLAIMS ASSERTING HOSTILE WORK ENVIRONMENT

Sexual harassment is a form of sex discrimination prohibited by the Florida Civil Rights Act and under the federal civil rights law referred to as Title VII, so that an employee may assert a claim for sexual harassment under section 760.10, Florida Statutes. Although neither the Florida nor the Federal Civil Rights Acts specifically mention sexual harassment, the United States Supreme Court in Harris v. Forklift Sys., Inc., 510 U.S. 17 (1993), recognized that “[t]he phrase ‘terms, conditions, or privileges of employment’ evinces a congressional intent to strike at the entire spectrum of disparate treatment of men and women in employment, which includes requiring people to work in a discriminatorily hostile or abusive work environment.” Although Title VII’s prohibition of sex discrimination clearly includes sexual harassment, Supreme Court precedent Oncale v. Sundowner Offshore Services, Inc., 523 U.S. 75 (1998), has held that Title VII is not a federal “civility code.” In Oncale, the Supreme Court stated that, “[w]e have never held that workplace harassment, even harassment between men and women, is automatically discrimination because of sex merely because the words used have sexual content or connotations.” Along this line, in Faraghar v. City of Boca Raton, 524 U.S. 775 (1998), the Supreme Court explained its interpretation of TitleVII claims asserting a hostile work environment that, “[a] recurring point in these opinions is that ‘simple teasing,’ offhand comments, and isolated incidents (unless extremely serious) will not amount to discriminatory changes in the ‘terms and conditions of employment.’” In other words, “not all workplace conduct that may be described as ‘harassment’ affects a ‘term, condition, or privilege’ of employment within the meaning of Title VII.” Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57 (1986). Peter Mavrick is a Miami employment attorney, who defends businesses and their owners against employment law claims asserting employment discrimination and retaliation as well as claims for overtime wages and other related claims. The Mavrick Law Firm also represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

In brief, hostile work environment cases are based on bothersome attentions or sexual remarks that are sufficiently severe or pervasive to create a hostile work environment. Businesses defending against such claims will objectively look at the facts in light of what case law requires to defend against the claims. Where harassment is perpetrated by a co-worker (as opposed to a supervisor or manager), to establish a hostile work environment sexual harassment claim, an employee must show that: (1) the employee is a member of a protected group; (2) the employee was subjected to unwelcome sexual harassment, such as sexual advances, requests for sexual favors, and other conduct of a sexual nature; (3) the harassment was based on the sex of the employee; (4) the harassment was sufficiently severe or pervasive to alter the terms and conditions of employment and create a discriminatorily abusive working environment; and (5) that the employer knew or should have known about the harassment and took insufficient remedial action. Speedway v. SuperAmerica, LLC v. Dupont, 933 So.2d 75 (Fla. 5th DCA 2006). The United States Court of Appeals for the Eleventh Circuit in Mendoza v. Borden, Inc., 195 F.3d 1238 (11th Cir. 1999), explained that in a sexual harassment lawsuit, courts consider four factors to objectively determine whether an alleged hostile environment is sufficiently severe and pervasive to alter the terms and conditions of employment: (1) the frequency of the conduct; (2) the severity of the conduct; (3) whether the conduct was physically threatening or humiliating; and (4) whether the conduct unreasonably interfered with the employee’s job performance. The Mendoza decision explained that the objective severity of the harassment must be judged from the perspective of a reasonable person in the plaintiff’s position, taking into consideration all the circumstances. For example, in Mendoza the Eleventh Circuit explained that “a single instance of a slight physical contact, one arguably inappropriate statement, and three instances of [a co-worker] making a sniffing sound[,]…over an eleven month period,” were “far too infrequent to alter conditions” under which the harassment victim was required to perform her job. Similarly, the United States Court of Appeals for the Tenth Circuit in Sprague v. Thorn Americas, Inc., 129 F.3d 1355 (10th Cir. 1997), held that five “sexually-oriented, offensive” statements over sixteen months was insufficient to show a hostile work environment, even though the offensive statement from one of the harassers occurred while he put his arm around plaintiff, looked down her dress. These cases, however, do not tell the whole story in an evolving area of law. Decisions of liability will depend on the fact pattern as well as the credibility of witnesses and other evidence.

Peter Mavrick is a Miami employment lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.

Published on: May 28, 2023

DEFENDING FLORIDA EMPLOYERS: INDEPENDENT CONTRACTOR EXEMPTION TO OVERTIME WAGE CLAIMS

By Mavrick Law Firm

The Fair Labor Standards Act (often referred to as the “FLSA”) applies to “employees” but does not apply to “independent contractors.” The FLSA has an expansive definition of who constitutes an employee. At 29 U.S.C. section 203(e)1), the FLSA defines the term “employee” as “any individual employed by an employer.” The FLSA, at 29 U.S.C. section 203(g), defines the term “employ” as “to suffer or permit to work.” The United States Supreme Court in Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947), opaquely explained that the determination of whether a person is an employee, as opposed to an independent contractor, is based on the “underlying economic realities” as exposed by the “circumstances of the whole activity. Fortunately, later appellate decisions from the United States Court of Appeals for the Eleventh Circuit (i.e., the federal appellate court governing all federal courts in the State of Florida) along with other appellate courts have clarified specific criteria used to decide whether an individual is properly classified as an “employee” or instead as an “independent contractor.” Peter Mavrick is a Fort Lauderdale employment attorney, who defends businesses and their owners against employment law claims, including claims asserting employment discrimination and retaliation as well as claims for overtime wages and other related claims. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

The United States Court of Appeals for the Fifth Circuit in Usery v. Pilgrim Equip. Co., 527 F.2d 1308 (5th Cir. 1976), the controlling factor whether a person is an employee or independent contractor is whether, “as a matter of economic reality,” a worker is “dependent upon the business to which they render service.” Sometimes businesses have mislabeled employees as independent contractors in employment contracts and visa versa. The particular label is not dispositive. Economic reality, rather than any label placed on the relationship by the parties, controls. In this regard, the Supreme Court’s Rutherford Food Corp. decision stated in pertinent part: “[w]here the work done, in its essence, follows the usual path of an employee, putting on an ‘independent contractor’ label does not take the worker from the protection of the [FLSA].”

The United States Department of Labor has issued a regulation, at 29 C.F.R. section 500.20(h)(4) that follows the “economic realities” test and the guiding factors as set forth the by the federal courts to determine employment status under the FLSA. Precedent from the Eleventh Circuit, in Freund v. Hi-Tech Satellite, Inc., 185 Fed.Appx. 782 (11th Cir. 2006), articulated several factors courts use in a balancing test to decide whether an individual is an independent contractor:

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Published on: May 21, 2023

MIAMI BUSINESS LITIGATION: DEFEATING TRADE SECRETS AND NON-COMPETE CLAIMS BASED ON CUSTOMER LISTS

By Mavrick Law Firm

Many non-compete agreements contain covenants asserting that the employer business has protectible trade secrets. A contractual provision where the parties agree, ex ante, that the employer will have (or actually has) a “trade secret” does not thereby mean the employer will have (or has) a trade secret in the future. As Florida’ Fourth District Court of Appeal explained in Zodiac Records Inc. v. Choice Environmental Services, 112 So.3d 587 (Fla. 4th DCA 2013), “[w]e note that a former employer’s customer relationships do not automatically qualify as trade secrets, even if a party’s restrictive covenant attempts to characterize them as such.” Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Florida Statutes Section 688.002(4), states in pertinent part: “‘Trade secret’ means information, including a formula, pattern, compilation, program, device, method, technique, or process that: (a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Precedent from Florida’s Second District Court of Appeal in East v. Aqua Gaming, 805 So.2d 932 (Fla. 2d DCA 2001), states that to qualify as a trade secret, there must be evidence that a customer list “was the product of great expense and effort, that it included information that was confidential and not available from public sources, and that it was distilled from larger lists of potential customers into a list of viable customers for [a] unique business.”

Employers often seek to premise restrictive covenants on the existence of trade secrets because Florida’s restrictive covenant statute thereby extends the allowable duration of a non-compete covenant. Under § 542.335(1)(d)(1), an employment agreement that is not based on trade secrets is presumed reasonable for only six months or less and presumed unreasonable when it extends beyond two years. By contrast, Florida’s restrictive covenant statute, at § 542.335(1)(e), extends the presumption of reasonableness to up to five years when actual trade secrets underlie the non-compete agreement and presumes a duration in excess of ten years as unreasonable.

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Published on: May 10, 2023

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS AND MISAPPROPRIATION OF TRADE SECRETS

By Mavrick Law Firm

Businesses sometimes suffer from disloyal employees who misappropriate trade secrets and confidential information, diverting them to competitors. Such unfair competition can be addressed through contractual claims based on non-compete agreements as well as claims for trade secret misappropriation. Because Florida’s restrictive covenant statute, Florida Statutes Section 542.335, provides strong remedies for businesses, including obtaining a temporary injunction, a non-compete agreement is often the most effective enforcement tool. However, when a disloyal employee transfers trade secrets to a competitor, a claim for trade secret misappropriation is an essential tool for both injunctive relief and recovery of damages. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Under Florida’s restrictive covenant statute, Section 542.335(1)(b)(1), a “trade secret” is deemed to be a legitimate business interest to enforce a non-compete covenant. A non-compete agreement that is predicated on protection of a trade secret is accorded a lengthy period of enforcement. The statute provides in pertinent part, at Section 542.335(1)(e): “In determining the reasonableness in time of a postterm restrictive covenant predicated upon the protection of trade secrets, a court shall presume reasonable in time any restraint of 5 years or less and shall presume unreasonable in time any restraint of more than 10 years. All such presumptions shall be rebuttable presumptions.” Obtaining a temporary injunction against a former employee is usually the most effective way to prevent further harm to the business. Problems, arise, however, when employees have given third parties the trade secrets the business needs to protect. In such cases, a trade secret misappropriation claim would be essential to protect the value of the trade secret. A trade secret must retain its secrecy either through protective measures or court action.

The Defend Trade Secrets Act is a federal law allowing a business owner to sue for trade secret misappropriation. The trade secret owner must prove that (1) the plaintiff-business owns the trade secret, (2) the defendant misappropriated the trade secret, and (3) the plaintiff-business suffered damages. As the United States Court of Appeals for the Ninth Circuit explained in InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653 (9th Cir. 2020), “the definition of trade secret consists of three elements: (1) information, (2) that is valuable because it is unknown to others, and (3) that the owner has attempted to keep secret.” In business litigation concerning misappropriation of trade secrets, the plaintiff must identify the trade secrets and prove they exist. In Autodesk, Inc. v. ZWCAD Software Co., 2015 WL 2265479 (N.D. Cal. May 13, 2015), the United States District Court for the Northern District of California explained that a plaintiff “need not ‘spell out the details of the trade secret.'” However, the InteliClear appellate decision makes clear that the plaintiff must at least “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons…skilled in the trade.” A plaintiff must describe the trade secret with sufficient particularity to permit the defendant “to ascertain at least the boundaries within which the secret lies.” Vendavo, Inc. v. Price f(x) AG, 2018 WL 1456697 (N.D. Cal. March 23, 2018). Identifying trade secrets with sufficient particularity is important because defendants need concrete identification to prepare a rebuttal.

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Published on: April 8, 2023

MIAMI BUSINESS LITIGATION: NON-COMPETE AGREEMENTS BASED ON CONFIDENTIAL OR TRADE SECRET INFORMATION

By Mavrick Law Firm

Under Florida’s non-compete statute, Florida Statutes Section 542.335(1)(b), “[t]he person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.” The term “legitimate business interest” includes trade secrets (as defined in Florida Statutes Section 688.002(4)) and “valuable confidential business or professional information.” Florida and federal courts scrutinize the facts to assess whether the employer has satisfactorily proven the existence of “trade secrets” and “valuable confidential information.” In many cases, businesses seek to enforce non-compete agreements based on alleged trade secret or confidential information that do not qualify as such under the statute. Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

To sufficiently plead and prove a legitimate business interest in confidential or proprietary information, an employer must articulate the information it deems confidential or proprietary. Florida’s Fourth District Court of Appeal in Passalacqua v. Navient, Inc., 844 So.2d 792 (Fla. 4th DCA 2003), determined there was no legitimate business interest where the employer failed to “articulate how any activity, method or technique utilized by [the company] was unique or proprietary in any way.” Similarly, the United States District Court for the Middle District of Florida in Lucky Cousins Trucking, Inc. v. QC Energy Res. Texas, LLC, 223 F.Supp.3d 1221 (M.D. Fla. 2016), explained that “[g]eneric allegations do not establish a legitimate business interest.” An employer must prove that the employees could use the information to gain an unfair advantage. As the Passalacqua decision explained, “[g]eneralized statements of concern cannot substitute as proof.” As it relates to alleged trade secrets on which the non-compete agreement is bsed, information commonly known in the industry and not unique to the former employer is not “confidential” and thus not entitled to protection. Keel v. Quality Medical Systems, Inc., 515 So.2d 337 (Fla. 3d DCA 1987).

Under Florida Statutes § 542.335(b)(2), the employer must prove that the employee could use the information to gain an unfair advantage. A great deal of non-compete litigation centers on whether the former employee took advantage of “substantial relationships” with specific customers. In Anich Indus. Inc. v. Raney, 751 So.2d 767 (Fla. 5th DCA 2000), Florida’s Fifth District Court of Appeal explained that, under Florida law, “information commonly known in the industry and not unique to [the] allegedly injured party [is] not ‘confidential’ and thus not entitled to protection.” The appellate court explained in pertinent part: “Anich’s contention that it proved that Raney sought to take advantage of substantial relationships with specific customers also is unsupported by the record from the hearing. Anich asserts that the ‘substantial relationships’ are those developed between the employee and the customer; Raney, on the other hand, submits that the ‘substantial relationships’ are those developed between the employee and the customer…Under either interpretation, however, ‘substantial relationships’ have not been shown. The customers who testified on Anich’s behalf all acknowledged that they made their industrial tool and equipment purchases based primarily on cost and the supplier’s ability to provide the goods quickly. There was little evidence of any exclusive or other kind of relationship that could be construed as ‘substantial’ with the meaning of the statute. Alternatively, under Raney’s interpretation [i.e., the employee’s interpretation], it is obvious that in less than three months with Anich she did not have the opportunity to develop a ‘substantial relationship’ with any of her customers.”

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Published on: March 8, 2023

FORT LAUDERDALE BUSINESS LITIGATION: THE COMPUTER FRAUD AND ABUSE ACT

By Mavrick Law Firm

The Computer Fraud and Abuse Act (sometimes referred to as the “CFAA”), 18 U.S.C. § 1030, is a federal law that prohibits access a computer and obtaining information without authorization or by exceeding authorized access. The statute (at section 1030(a)(2)(C)) states that whoever “intentionally accesses a computer without authorization or exceeds authorization and thereby obtains … information from any protected computer[,] if the conduct involved an interstate or foreign communication … shall be punished.” Although the CFAA is mainly a criminal statute, it also has a civil remedies applicable to business and employment litigation. The statute (at 18 U.S.C. § 1030(g)) states that “any person who suffers damage or loss [as a result of a violation] … may maintain a civil action … for compensatory damages and injunctive relief or equitable relief.” Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

A great deal of court litigation has been fought over whether the CFAA applies to situations where an employee was fully authorized to access and obtain certain information over a computer network, and then uses that network access for an illicit purpose such as for a competitor’s benefit. Employers have argued that its employees are authorized to use their work computers only conducting company business, not for the benefit of a competitive business venture. A problem with the CFAA is that the statute does not define the ambiguous wording “without authorization.” Federal courts have a split in authority concerning whether an employee with an improper purpose may be held civilly liable under the CFAA for acquiring computer information that is otherwise permitted to the employee in the course of his employment.

One line of authority has relied on the Restatement (Second) of Agency § 112, which explains that “[t]he authority of an agent terminates if, without knowledge of the principal, he acquires [an] adverse interest or if he is otherwise guilty of a serious breach of loyalty to the principal.” Courts following this line of authority have concluded there is a CFAA violation when an employee misuses his authority to access information on the employer’s computer network to to benefit someone other than the employer. For example, in Int’l Airport Centers, L.L.C. v. Citrin, 440 F.3d 418 (7th Cir. 2006), the United States Court of Appeals For The Seventh Circuit held that “Citrin violated [the CFAA because] his authorization to access the laptop terminated when, having already engaged in misconduct and decided to quit IAC in violation of his employment contract, he resolved to destroy files that incriminated himself and other files that were also the property of his employer, in violation of the duty of loyalty that agency law imposes on an employee.” Similarly, in a trade secret misappropriation lawsuit, the federal district court in Shurgard Storage Centers, Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121 (W.D. Wash. 2000), concluded the employer properly stated a claim under the CFAA against an employee who had “full access” to the employer’s computers, but who used that access to misappropriate trade secrets to benefit a competitor.

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Published on: February 25, 2023

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS BASED ON TRADE SECRETS AND CONFIDENTIAL INFORMATION

By Mavrick Law Firm

The State of Florida enacted Florida Statutes Section 542.335 to allow non-compete agreements where there is a “legitimate business interest.” Two frequently cited “legitimate business interests” are confidential information and trade secrets. In an employment context, a non-compete agreement based on “[v]aluable confidential business or professional information” (referenced in Florida Statutes Section 542.335(1)(b)(2)), Florida law presumes as “reasonable” a post-employment restriction of six months or less and presumes as “unreasonable” a restriction of more than two years. For trade secrets, however, Florida law is far more generous. Florida Statutes Section 542.335(1)(3) vastly expands the presumption of reasonable duration as being up to five years and presumes an unreasonable duration to be more than ten years. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

In some cases, restrictive covenants on allegedly “confidential” or “trade secret” information that does not qualify as such. Fundamentally, Florida and federal law require that confidential and trade secret information be subject to efforts that are reasonable under the circumstances to maintain secrecy. To ensure information is treated in a confidential manner, courts expect, at a minimum, that there are limits on employee access to the information as well as password protecting the computer network on which the information resides. VAS Aero Servs., LLC v. Arroyo, 860 F.Supp.2d 1349 (S.D. Fla. 2012) (explaining that these measures are influential in reasonably securing trade secrets). The employer, however, must ensure that the allegedly confidential or trade secret information is handled in a confidential or secret manner. This includes preventing employees from storing putative confidential or trade secret information on their personal cellphone or laptop computers. For example, the federal district court in Diamond Power Int’l, Inc. v. Davidson, 540 F.Supp.2d 1322 (N.D. Ga. 2007), found it significant that the plaintiff business failed to prevent its employees from transferring a file, allegedly constituting a trade secret, to their personal computers. Similarly, the United States Court of Appeals for the Eleventh Circuit in Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018), held there was no viable trade secret under the Florida Uniform Trade Secrets Act because the employer (i.e., Yellowfin) did not deploy reasonable measures to ensure its information was kept secret. The appellate court explained in pertinent part that: “Indeed, Barker refused to sign an employment agreement which stated that he would, among other things, keep all Yellowfin trade secrets in confidence. Further, Yellowfin neither marked the Customer Information as confidential nor instructed Barker to secure information on his personal devices. And when Barker left Yellowfin, the company did not request that Barker return or delete any of the information.”

Where employers are unable to prove they had an explicit understanding with their employees that certain information is confidential, Florida law sometimes allow protection based on an implied confidential relationship between the employer and employees. However, the U.S. Court of Appeals for the Eleventh Circuit in Bateman v. Mnemonics, Inc., 79 F.3d 1532 (11th Cir. 1996), explained that “[a]lthough Florida law recognizes implied confidential relationships sufficient to trigger trade secret liability” the appellate court expressed it is “wary of any trade secret claim predicated on the existence of” such a relationship. The Yellowfin Yachts decision rejected the employer/plaintiff’s contention that its “general verbal statements warning employees not to share its Confidential Information with third parties” was adequate to establish that company information was truly kept confidential. The appellate court explained that: “In sum, with mere verbal statements that the Customer Information should not be given to outsiders, Yellowfin relinquished the information to Barker, who refused to sign a confidentiality agreement, with no instruction to him as to how to secure the information on his cellphone or personal laptop. In doing so, Yellowfin effectively abandoned all oversight in the security of the Customer Information. Accordingly, the District Court did not err in determining that no reasonable jury could find that Yellowfin employed reasonable measures to secure the information.”

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Published on: January 25, 2023

FORT LAUDERDALE BUSINESS LITIGATION: RECOVERY OF DAMAGES FOR TRADE SECRET MISAPPROPRIATION

By Mavrick Law Firm

Corporations typically rely on employees to handle and safeguard confidential business information, including trade secrets. Under Florida law, a business can seek protection contractually, most often a non-compete agreement, to restrict an employee or former employee from competing by joining a competitor’s business, starting a competing business, or facilitating competition by using confidential or trade secret information. Such contracts typically include an obligation to keep trade secrets and other confidential information a secret. Florida law also affords protection to businesses via the employee “duty of loyalty,” which is a judicially created doctrine that imposes a duty on employee to refrain from actions calculated to harm an employer during the period of employment, including competition. When employees violate any of these legal protections, employers have various remedies against their former employees. Employers also have remedies against businesses that benefit from the employee passing trade secrets or other confidential information to competing businesses, via claims for trade secret misappropriation against the former employee and the competing business. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

In a lawsuit for misappropriation of a trade secret, “[d]amages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.” Florida Statutes section 688.004(1). Florida’s Second District Court of Appeal in Perdue Farms Inc. v. Hook, 777 So.2d 1047 (Fla. 2d DCA 2001), stated in pertinent part that, in such litigation, “when some damage is proven and ‘the uncertainty lies only in the amount of damages, recovery may be had if there is proof of a reasonable basis from which the amount can be inferred or approximated.'” The Perdue Farms decision explained that the plaintiff’s burden of proof as to damages caused by the misappropriation is “liberal” and is satisfied “by showing the misappropriation, the subsequent commercial use, and … evidence by which the jury can value the rights the defendant has obtained.”

Competing businesses who have unlawfully obtained trade secrets from a current or departing employees of competitors have sometimes tried to limit damages for their misappropriation. They have argued that damages be limited only to the “head-start period.” The United States District Court for the Southern District of Florida in Sensormatic Elec. Corp. v. TAG Co. US, 632 F.Supp.2d 1147 (S.D. Fla. 2008), defined the term “head-start period” as meaning “the amount of time it would have taken … [the trade secret misappropriator] to independently develop its product without the benefit of … [the trade secret owner’s] trade secrets.” In RRK Holding Co. v. Sears, Roebuck & Co., 563 F.Supp.2d 832 (N.D. Ill. 2008), the defendant business that benefited from the misappropriated trade secret argued that the plaintiff “failed to limit its damages claims to the time necessary to reverse engineer its trade secret product, i.e., the ‘head start’ period.” The jury instruction at issue read, “damages can include Plaintiff’s actual loss caused by Defendant’s misappropriation and the unjust enrichment caused by the misappropriation that is not taken into account in computing Plaintiff’s actual loss.” The court stated that “[w]hile Illinois case law requires damages be limited to a head start period for injunctive relief, it has not made such a requirement for monetary damages. The law does not support Defendant’s contention.” Similarly, CardioVention, Inc. v Medtronic, Inc., 483 F.Supp.2d 830 (D.Minn. 2007), explained that courts “have recognized that a plaintiff’s actual damages can be measured by the value of the loss of the secret to the plaintiff under the circumstances.”

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Published on: January 7, 2023

MIAMI BUSINESS LITIGATION: EMPLOYMENT NON-COMPETES WOULD BE NULLIFIED BY PROPOSED FEDERAL TRADE COMMISSION RULE

By Mavrick Law Firm

Under Florida law, non-compete agreements between employers and employees are allowed when they comply with the requirements of Florida’s restrictive covenant statute, Section 542.335, Florida Statutes. For years, Florida law has allowed non-compete agreements to protect apparent “legitimate business interests” referenced in Section 542.335(1)(b), such as, for example, protecting an employer’s interests in retaining trade secrets, goodwill with customers and referral sources, and investments in extraordinary or specialized employee training. However, much of Florida’s restrictive covenant statute would be effectively rescinded if a new rule proposed by the Federal Trade Commission (FTC) becomes effective. The FTC proposed rule would bar non-compete agreements with employees, including agreements which are not labeled as a “non-compete agreement,” but have the effect of barring an employee’s competition against his or her employer. The proposed FTC rule is set forth in a new Subchapter J, consisting of Part 910 to Chapter I in Title 16 of the Code of Federal Regulations. The proposed FTC rule has not become law at this point, and is subject to a comment period before being promulgated. In addition, the legal viability of the proposed FTC rule will likely be tested in state and federal courts. The courts will make the final decision regarding whether the final FTC rule is enforceable, or the extent to which it is enforceable. Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

The proposed FTC rule defines a “non-compete clause” as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.” The proposed rule recognizes that businesses sometimes have used contractual provisions that do not explicitly bar competion, but nevertheless have the effect of barring competition. The FTC proposed rule refers to such clauses as “de facto” non-compete contractual clauses. The proposed FTC rule sets forth a “functional test” to assess whether a contractual term operates as a prohibited, de facto non-compete clause:

“(2) Functional test for whether a contractual term is a non-compete clause. The term non-compete clause includes a contractual term that is a de facto non-compete clause because it has the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer. For example, the following types of contractual terms, among others, may be de facto non-compete clauses:

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Published on: December 21, 2022

FORT LAUDERDALE BUSINESS LITIGATON: RECOVERY OF DAMAGES FOR BREACH OF NON-COMPETE AGREEMENTS

By Mavrick Law Firm

Most litigation over restrictive covenants are resolved at the conclusion of the temporary injunction hearing. At that stage, the trial judge has made a decision whether the plaintiff is substantially likely to succeed on the merits of the case. The parties usually are motivated to settle the case at that point. However, in some cases a party seeks to recover damages at a trial on the merits. This sometimes happens in cases where a party has incurred large losses and seeks to collect damages arising from the defendant’s breach of contract. Florida law recognizes that “[t]he measure of damages for a breach of a non-competition agreement is the actual damages suffered as a result of the breach, which is generally loss of profits.” Camel Invs., Inc. v. Webber, 468 So. 2d 340 (Fla. 1st DCA 1985) (citing 54 Am.Jur.2d, Monopolies, section 579 (1971)). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

“Generally, the aggrieved party in a breach of noncompetition agreement case seeks lost profits as the measure of damages.” Moon v. Med. Tech. Assocs., Inc., No. 8:13-CV-02782-EAK, 2015 WL 1227499 (M.D. Fla. Mar. 17, 2015) (citing Camel Investments, Inc. v. Webber, 468 So.2d at 342). “Lost profits, however, are not the only recoverable damages; the measure of damages is ‘the actual damages suffered as a result of the breach[.]’” Moon at *2 (citing Collier v. Crane Inspection and Certification Bureau, Inc., 382 So.2d 424 (Fla.Dist.Ct.App.1980)). “There are two generally recognized methods of proving lost profits: (1) the before and after theory and (2) the yardstick test.” G.M. Brod & Co., Inc. v. U.S. Home Corp., 759 F.2d 1526 (11th Cir.1985) (quoting Lehrman v. Gulf Oil Corporation, 500 F.2d 659 (5th Cir.1974)). “The before and after theory compares the plaintiff’s profit record prior to the violation with that subsequent to it.” Lehrman. 500 F.2d at 667. The yardstick test is often employed when a plaintiff “is driven out of business before he is able to compile an earnings record sufficient to allow estimation of profits.” Id. Where a party was not driven out of business and has compiled record of earnings to allow an estimation of profits, the “before and after theory” of lost profits damages is applicable.

Under Florida law, to recover lost profits “[t]he party must prove that 1) the defendant’s action caused the damage and 2) there is some standard by which the amount of damages may be adequately determined. Katz Deli of Aventura, Inc. v. Waterways Plaza, LLC, 183 So. 3d 374 (Fla. 3d DCA 2013) (citing W.W. Gay Mech. Contractor, Inc. v. Wharfside Two, Ltd., 545 So.2d 1348 (Fla.1989). “The projected profits cannot be mere speculation or conjecture, but the inability to prove a precise damages amount will not prevent a plaintiff from recovering so long as it is clear that some loss resulting from the defendant’s actions is certain. Id. (internal citations omitted). “Lost profits must be established with a reasonable degree of certainty and must be a natural consequence of the wrong. Sostchin v. Doll Enterprises, Inc., 847 So. 2d 1123, 1128 (Fla. 3d DCA 2003). The party seeking lost profit damages must “provide competent evidence sufficient to satisfy the mind of a prudent impartial person as to the amount of profits lost as a result” of the wrongdoing. Id. (citing North Dade Community Development Corp. v. Dinner’s Place, Inc., 827 So.2d 352 (Fla. 3d DCA 2002)).

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