Articles Posted in Non-Compete Agreements

Physicians have sometimes challenged their non-compete agreements on the grounds that continuity of patient care is an “overriding public policy reason.”  Physicians have argued that public policy allows the physician to care for his patients after termination of his employment, even when the wording of the restrictive covenant bars the physician from continuing to treat those patients.  Over the years, Florida courts have wrestled with this issue.  Florida non-compete covenant law has changed over the years based on various statutes that were re-written and amended.  Florida’s statutory scheme governing restraints on competition significantly changed on July 1, 1996, the effective date of Florida’s current non-compete statute.   Peter Mavrick is a Miami non-compete attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm also represents businesses and their owners in business litigation (including claims of breach of contract and related claims of fraud and other business torts), trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state trial courts, appeals, and in arbitration.

Under Florida law, a trial court that refuses to enforce a restrictive covenant based on public policy must specify in its findings the compelling reasons why enforcement is not in the public interest.  In TransUnion Risk and Alt. Data Sols., Inc. v. Reilly, 181 So.2d 548 (Fla. 4th DCA 2015), Florida’s Fourth District Court of Appeal explained  that “[u]nder section 542.335(1)(i)[Florida Statutes], a trial court must specifically articulate an overriding public policy reason if it refuses to enforce a non-compete covenant based on public policy grounds.”

In the recent case Joseph Spine, P.A. v. Moulton, M.D., 346 So.3d 154 (Fla. 2d DCA 2022), a physician, Dr. Moulton, sought to avoid compliance with his non-compete contract on the grounds that the non-compete violates public policy.  Dr. Moulton, had been employed by a Joseph Spine, P.A. and argued he should be released from his non-compete covenant, at least with respect to his right to continue to serve patients to whom he had provided medical services before ending his employment with Joseph Spine, P.A.  Dr. Moulton, argued that “continuity of care is an ‘overriding public policy reason’” and used as an example a particular patient “who was dissatisfied with his care at Joseph Spine and elected to leave that practice.”  The appellate court referenced the fact that the the trial court Judge had “expressed concern at the [court] hearings … that enforcing the restrictive covenants would adversely affect patients’ continuity of care, freedom in choosing physicians, the bearing of risk between physicians after surgery, and the proximity of follow-up care for patients relative to where their procedures were performed.”  The appellate court did not agree with the trial Judge, explaining that “despite the trial court’s findings that its public policy concerns were limited to ‘this case, with these facts,’ the record does not indicate any unique or special circumstances distinguishing continuity of care with the patients affected here from other patients who are generally affected by restrictive covenants enforced against physicians practicing in Florida.”  Section 542.335(1)(i), Florida Statutes requires a trial court to explain why a patient’s continuity of care “substantially outweighs” Florida’s long-established precedent of protecting legitimate business interests.  The appellate court’s decision in Moulton relied on its observation that “the trial court’s brief mention of protecting patients’ continuity of care does not explain why this concern substantially outweighs enforcement of the restrictions against Dr. Moulton.”  Accordingly, the appellate court in Moulton reversed the trial Judge’s decision and entered a temporary injunction barring Dr. Moulton from competing against his former employer.

Florida law sets forth the requirements for entry of a non-compete injunction, i.e., a court order barring competition under specified circumstances and duration.  Relevant here, section 542.335(1)(j), Florida Statutes, provides that a court shall enforce a valid “restrictive covenant by any appropriate and effective remedy, including but not limited to, temporary and permanent injunctions.”   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 litigation, and other legal disputes in federal and state courts and in arbitration.

To obtain a temporary injunction, a party must establish “(1) a substantial likelihood of success on the merits, (2) the unavailability of an adequate remedy of law, (3) irreparable harm absent entry of an injunction, and (4) that the injunction would serve the public interest.”  Florida Department of Health v. Florigrown, LLC, 317 So.3d 1101 (Fla. 2021).  Under Florida’s restrictive covenant statute, section 542.335(1)(a), to be enforceable a non-compete covenant must be reasonable as to “time, area, and line of business” and “set forth in a writing signed by the person against whom enforcement is sought.  In addition, Florida law requires that a contractual provision restricting competition must involve a legitimate business interest as defined by statute to be enforceable. Section 542.335(1)(b), Florida Statutes, states that “[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.”  Florida’s non-compete covenant statute provides a non-exhaustive list of legitimate business interests.  The Supreme Court of Florida has explained that “the determination of whether an activity qualifies as a protected legitimate business interest under the statute is inherently a factual inquiry, which is heavily industry and context specific.”  White v. Mederi, 226 So.3d 774 (Fla. 2017).  A party seeking a temporary injunction “must plead and prove that the contractually specified restrain is reasonably necessary to protect the legitimate business interest or interests justifying the restriction.”  § 542.335(1)(c).  Once a party establishes a prima facie case that the restriction is reasonably necessary, the statute explains that “the person opposing enforcement has the burden of establishing that the contractually specified restrain is overbroad, overlong, or otherwise not reasonably necessary to protect the established legitimate business interest or interests.”  Importantly, Florida’s restrictive covenant statute, at section 542.335(1)(h), requires that courts construe restrictive covenants “in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement,” and without application of  “any rule of contract construction that requires the court to construe a restrictive covenant narrowly, against the restraint, or against the drafter of the contract.”

To issue an injunction, Florida courts are required to follow Florida Rule of Civil Procedure 1.610(c), setting forth the act or acts restrained by the injunction.  In other words, the Judge must specify exactly what is prohibited by the injunction.  Concerning the specificity of what conduct is prohibited by an injunction, Florida’s Fifth District Court of Appeal in Clark v. Allied Assocs., Inc., 477 so.2d 656 (Fla. 5^th DCA 1985), explained that, “[o]ne against whom an injunction is directed should not be left in doubt as to what he is required to do.”  Rule 1.610(c) provides that an injunction “shall describe in reasonable detail the act or acts restrained without reference to a pleading or another document.”  “A temporary injunction requires strict compliance with Florida Rule of Civil Procedure 1.610.” Coscia v. Old Fla. Plantation, Ltd., 828 So.2d 488 (Fla 2d DCA 2002).

A prevalent issue in non-compete litigation is whether a company’s non-compete agreement is enforceable to protect its substantial business relationships. These business relationships must be specific and identifiable, but they are not required to be contractual in nature. Indeed, prospective substantial business relationships are protected if they fit these requirements. A business’ substantial business relationships qualify as a protectable “legitimate business interest” under Florida’s non-compete statute, Section 542.335. 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 litigation, and other legal disputes in federal and state courts and in arbitration.

“Section 542.335(1), Florida Statutes, permits enforcement of contracts that restrict or prohibit competition, but only ‘so long as such contracts are reasonable in time, area, and line of business….’” Envtl. Servs., Inc. v. Carter, 9 So. 3d 1258 (Fla. 5th DCA 2009). This section also requires “that the restrictive covenant be set forth in a writing signed by the person against whom enforcement is sought, and that the restraint be shown to be reasonably necessary to protect the ‘legitimate business interests’ justifying the restriction.” Henao v. Prof’l Shoe Repair, Inc., 929 So. 2d 723 (Fla. 5th DCA 2006).

“[L]egitimate business interest[s]” include “[s]ubstantial relationships with specific prospective or existing customers . . . or clients.” Accordingly, “‘the right to prohibit the direct solicitation of existing customers’ is a legitimate business interest.” Hilb Rogal & Hobbs of Fla., Inc. v. Grimmel, 48 So. 3d 957 (Fla. 4th DCA 2010). However, “the protection of former customers generally does not qualify as a legitimate business interest where no identifiable agreement exists with such customers establishing that they would return with future work.” Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So. 2d 812 (Fla. 1994). Moreover, an employer business is not able to protect against ordinary competition, and such covenants designed solely for those purposes are not enforceable. PartyLite Gifts, Inc. v. MacMillan, 895 F. Supp. 2d 1213 (M.D. Fla. 2012).

The law regarding the enforceability of non-compete agreements varies by state. Under Florida law, three requirements must be satisfied for a restrictive covenant to be enforceable: (1) the restrictive covenant must be “set forth in writing signed by the person against whom enforcement is sought”; (2) the party seeking to enforce the restrictive covenant “shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant”’ and (3) the party seeking to enforce the restrictive covenant “shall plead and prove that the contractually specified restraint necessary to protect the legitimate business interest or interests justifying the restriction.” § 542.335, Fla. Stat. Peter Mavrick is a Fort Lauderdale non-compete  attorney, and represents clients in non-compete litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm also represents clients in business litigation (including breach of contract litigation and related claims of fraud), trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Florida courts will enforce non-compete covenants only where they are reasonable. Quirch Foods LLC v. Broce, 314 So. 3d 327 (Fla. 3d DCA 2020). The covenant must be “reasonable in time, area, and line of business . . . ” § 542.335, Fla. Stat. “Thus a prerequisite for enforceability is that the covenant appear on its face to be reasonable.” Silvers v. Dis-Com Securities, Inc., 403 So. 2d 1133 (Fla. 4th DCA 1981). “This is part and parcel of plaintiff’s cause of action so that the court may address the issue of reasonableness in time and area whether or not the defendant raises the question in his pleadings.” Silvers v. Dis-Com Securities, Inc., 403 So. 2d 1133 (Fla. 4th DCA 1981). “On the other hand if the covenant appears on its face to be reasonable then the burden shifts to the defendant to plead and prove that it is for some reason not reasonable on the facts of the particular case.” Silvers v. Dis-Com Securities, Inc., 403 So. 2d 1133 (Fla. 4th DCA 1981).

Employee agreements containing non-compete covenants, however, may contain a choice-of-law provision of another state. Florida courts will generally apply the law of another state when analyzing the reasonableness of a non-compete covenant where the employment agreement containing the non-compete covenant contains a choice of law provision of another state. Mazzoni Farms Inc. v. E.I. DuPont De Nemours & Co., 761 So. 2d 306 (Fla. 2000) (holding that contractual choice-of-law provisions are presumptively valid and enforceable in Florida unless the law of the chosen forum contravenes strong public policy). Thus, if an employee lives in Florida but works remotely in another state, Florida law will not automatically apply. Rather, Florida courts will look to the law of the state governing the employment agreement to determine whether a non-compete clause is enforceable. Additionally, Florida companies may have to enforce their non-compete agreements for remote employees in the state where the employee lives. Not every state follows Florida’s strong public policy of enforcing reasonably written non-compete clauses, and not every state provides the same level of protection to companies that the law in Florida provides.

Non-compete agreements and other restrictive covenants in employment contracts are enforceable if they protect a business’ legitimate business interest. A “legitimate business interest must represent an investment by the employer and must enable unfair competition if misappropriated.” IDMWORKS, LLC v. Pophaly, 192 F. Supp. 3d 1335 (S.D. Fla. 2016). Florida’s non-compete statute, Section 542.335, includes a non-exhaustive list of examples of legitimate business interests, one of which is the business’ “extraordinary or specialized training.” 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.

Under Florida law, “a ‘legitimate business interest’ is an identifiable business asset that constitutes or represents an investment by the proponent of the restriction such that, if that asset were misappropriated by a competitor (i.e., taken without compensation), its use in competition against its former owner would be “unfair competition.” White v. Mederi Caretenders Visiting Servs. Of Se. Fla, LLC, 226 So. 3d 774 (Fla. 2017). Indeed, the Supreme Court of Florida has held that a “legitimate business interest is a business asset that, if misappropriated, would give its new owner an unfair competitive advantage over its former owner.” White v. Mederi Caretenders Visiting Servs. Of Se. Fla, LLC, 226 So. 3d 774 (Fla. 2017). An employer can enforce a non-compete agreement if “there [are] special facts present over and above ordinary competition such that, absent a non-competition agreement, ‘the employee would gain an unfair advantage in future competition with the employer.’” Passalacqua v. Naviant, Inc., 844 So.2d 792 (Fla. 4th DCA 2003).

Training an employee constitutes a legitimate business interest protectable by Florida law when the training rises to the level of being specialized or extraordinary. Training is classified as extraordinary when it exceeds ‘what is usual, regular, common, or customary in the industry in which the employee is employed.’” Dyer v. Pioneer Concepts Inc., 667 So. 2d 961 (Fla. 2d DCA 1996). The special training must go above and beyond “what would be common or typical in the industry.” Autonation Inc. v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004). A business’ optional training will “not constitute a legitimate business interest sufficient to justify injunctive relief.” Austin v. Mid State Fire Equip. of Cent. Florida, Inc., 727 So. 2d 1097 (Fla. 5th DCA 1999). As such, Florida courts have found no legitimate business interest where an employee “was not required to attend the various training seminars and only ‘popped in and out’ of the meetings.” Autonation Inc. v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004).

A prevalent issue in business litigation is whether an injunction is needed to enforce a restrictive covenant and protect a party’s legitimate business interest. In Florida, Section 542.335, Florida Statutes, governs the enforcement of restrictive covenants. Under section 542.335, “[a] trial court may grant a temporary injunction if the complainant proves ‘(1) the likelihood of irreparable [injury], (2) the unavailability of an adequate remedy at law, (3) a substantial likelihood of success on the merits, and (4) that a temporary injunction will serve the public interest.’” TransUnion Risk & Alternative Data Sols., Inc. v. Reilly, 181 So. 3d 548 (Fla. 4th DCA 2015). 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 litigation, and other legal disputes in federal and state courts and in arbitration.

A showing of irreparable injury is required for a temporary injunction to issue. Surgery Ctr. Holdings, Inc. v. Guirguis, 318 So. 3d 1274 (Fla. 2d DCA 2021). With respect to the likelihood of irreparable injury, Section 542.335(1)(j) provides that “[t]he violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant.” Thus, “a party seeking to enforce a restrictive covenant by injunction need not directly prove that the defendant’s specific activities will cause irreparable injury if not enjoined.” Am. II Elecs., Inc. v. Smith, 830 So. 2d 906 (Fla. 2d DCA 2002). A party only needs to prove a violation of an enforceable restrictive covenant to be entitled to the presumption. Surgery Ctr. Holdings, Inc. v. Guirguis, 318 So. 3d 1274 (Fla. 2d DCA 2021).

An enforceable restrictive covenant is one in which “the contractually specified restraint is reasonably necessary to protect [a] legitimate business interest.” Section 542.335(1)(c). “Therefore, to benefit from the presumption of irreparable injury, the party seeking to enforce a covenant not to compete must show that the covenant protects a legitimate business interest as defined by section 542.335(1)(b) and that the covenant was violated.” Walsh v. Paw Trucking, Inc., 942 So. 2d 446 (Fla. 2d DCA 2006). Fla. Stat.

Business litigation often involves contractual disputes between employers and employees concerning the enforceability of non-compete agreements or other restrictive covenants. Under Florida law, a contractual non-compete restriction cannot be used solely as a tool to eliminate competition or merely to prevent an employee from working with a competing employer in any capacity. When a breach-of-contract action is based upon enforcement of a restrictive covenant, the plaintiff must plead and prove specific elements to establish that the restrictive covenant is a valid restraint of trade. Rauch, Weaver, Norfleet, Kurtz & Co., Inc. v. AJP Pine Island Warehouses, Inc., 313 So. 3d 625 (Fla. 4th DCA 2021). “[T]he term ‘restrictive covenants’ includes all contractual restrictions upon competition, such as noncompetition/nonsolicitation agreements, confidentiality agreements, exclusive dealing agreements, and all other contractual restraints of trade.” Henao v. Prof’l Shoe Repair, Inc., 929 So. 2d 723 (Fla. 5th DCA 2006). 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.

“Section 542.335 contains a comprehensive framework for analyzing, evaluating and enforcing restrictive covenants in Florida based on an ‘unfair competition’ analysis.” Henao v. Prof’l Shoe Repair, Inc., 929 So. 2d 723 (Fla. 5th DCA 2006). Under Section 542.335, a plaintiff must satify three requirements to enforce a restrictive covenant: (1) the restrictive covenant must be “set forth in writing signed by the person against whom enforcement is sought”; (2) the party seeking to enforce the restrictive covenant “shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant”; and (3) the party seeking to enforce the restrictive covenant “shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction.” § 542.335, Fla. Stat.

Restrictive covenants are unlawful, void, and unenforceable if they are not supported by a legitimate business. “[T]he determination of whether an activity qualifies as a protected legitimate business interest under [Section 542.335] is inherently a factual injury, which is heavily industry – and context-specific.” White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 774 (Fla. 2017). “Section 542.335 provides a list of ‘legitimate business interests,’ but it specifically states that the list is not exclusive.” Infinity Home Care, L.L.C. v. Amedisys Holding, LLC, 180 So. 3d 1060, 1063 (Fla. 4th DCA 2015). Section 542.335 protects the following legitimate business interests: trade secrets; valuable confidential business or professional information that otherwise does not qualify as trade secrets; substantial relationships with specific or existing customers, patients, or clients; customer, patient, or client goodwill associated with an ongoing business or professional practice, a specific geographic location, or a specific marketing or trade area; and extraordinary or specialized training.