The Mavrick Law Firm regularly represents entrepreneurs who open businesses in industries in which they were formerly employees. As such, often times we are confronted with covenants not to compete signed by the entrepreneur when he or she was employed with his or her former employer. The covenants not to compete, also known as restrictive covenants, will usually restrict the entrepreneur from competing with the former employer for a certain time period and within a specific geographic area. The Miami non-compete attorneys at the Mavrick Law Firm have, on several occasions, successfully defended entrepreneurs from lawsuits seeking to enforce such covenants. In some of these cases, the entrepreneur/former employee may be able to file a counterclaim alleging a violation of the Fair Labor Standards Act (“FLSA”) against his or her former employer based on the employer’s failure to pay overtime or minimum wages. What the entrepreneur may not know is that not only may he or she be able to recover any wages that were not paid under the FLSA, he or she may also prevent the enforcement of a restrictive covenant by the employer.
The idea that a violation of the FLSA can prevent against a former employer’s enforcement of a restrictive covenant comes from two separate principles. The first principle was discussed by the Florida Fourth District Court of Appeal in Northern Trust Investments, N.A. v. Domino, 896 So. 2d 880, 882 (Fla. 4th DCA 2005), stating in pertinent part:
A party is not entitled to enjoin the breach of a contract by another, unless he himself has performed what the contract requires of him so far as possible; if he himself is in default or has given cause for nonperformance by defendant, he has no standing in equity…Having committed the first breach, the general rule is that a material breach of the Agreement allows the non-breaching party to treat the breach as a discharge of his contract liability. If the employer wrongfully refuses to pay the employee his compensation, the employee is relieved of any further obligation under the contract and the employer cannot obtain an injunction.