An employee’s reasonable belief that a particular territory is outside of the scope of a non-compete clause does not necessarily grant him/her license to work for a competitor in violation of the employment agreement. Peter Mavrick is a Miami non-compete lawyer who has extensive experience in representing the interests of businesses and business owners.
In Proudfoot Consulting Company, v. Gordon, 576 F.3d 1223 (11th Cir. 2009), Proudfoot Consulting Company (“Proudfoot”) entered an employment agreement with Derrick Gordon (“Gordon”) containing a non-compete, non-solicitation and a confidentiality clause (“non-compete clauses”). The non-compete clauses prohibited Gordon for a six-month period after termination of his employment, from doing the following: (1) working for a direct competitor or client of Proudfoot, (2) contacting Proudfoot’s clients and soliciting Proudfoot’s employees, and (3) using, disclosing, or retaining Proudfoot’s confidential information. Proudfoot was a management consulting firm that provided consulting services in the United States and Canada. Gordon was a Project Manager who was responsible for achieving results for clients, obtaining repeat business, and convincing clients to provide referrals and serve as a reference. During his employment with Proudfoot, Gordon had access to and received information in various forms about Proudfoot’s clients, projects, operations and confidential business information (including without limitation, hard copy manuals, training sessions and reviews of company projects).
In June 2006, Gordon resigned his employment with Proudfoot and immediately went to work for Highland, a direct competitor. Proudfoot filed a lawsuit seeking an injunction and damages. After a bench trial, the trial court held that each of the non-compete clauses were enforceable under Florida law. The trial court entered an injunction prohibiting Gordon from working for Highland and from soliciting Proudfoot’s clients and employees for a period of six months. The injunction was entered over a year and a half after Gordon began working at Highland. The trial court found that Gordon’s continuous work for Highland justified tolling the six-month restrictive period, pursuant to the tolling provision in the non-compete clause. Gordon immediately appealed.
On appeal, Gordon argued, among other things, that: (1) he did not intentionally retain any confidential Proudfoot materials, (2) his work for Highland in Canada should not have been considered a violation because Canada was not part of the geographic scope of the non-compete clause, and (3) even if his work in Canada was a breach of the contract, it was unintentional and should be disregarded. The appellate court was not persuaded by Gordon’s arguments.
Gordon’s first argument that he did not intentionally retain Proudfoot’s manuals and materials was rejected by the appellate court. The appellate court found that Proudfoot’s interest in confidential information was not limited to the physical materials he retained. During trial, Gordon admitted that he had access to confidential information about Proudfoot’s business, including pricing information, Proudfoot’s methodology for providing operational services, as well as Proudfoot’s products, offerings and tools. Gordon did not challenge the trial court’s findings on these points and did not contest that he could have used this information in his new position at Highland to compete unfairly against Proudfoot.
Gordon’s second argument that Canada was not part of the geographic scope of the non-compete clause was also rejected by the appellate court. Although the appellate court held that the trial court erroneously found that the applicable non-compete scope included, “North America and any other territory to which Gordon is assigned during his employment,” Gordon conceded that the trial court was permitted to supply a reasonable geographic scope. Gordon also testified that he worked on projects for Proudfoot which were in Canada and he attended weekly meetings that discussed every project in North America.
Gordon’s third argument that if his work for Highland in Canada was a breach of the non-compete, it was unintentional, was also rejected by the appellate court. Gordon argued that he had a good-faith reasonable belief that his work for Highland in Canada did not violate the non-compete clause. His belief was based on the fact that the non-compete clause did not explicitly include a geographic scope and that his territory at Proudfoot did not include Canada. Gordon argued that under Florida law, an intentional breach of a non-compete is required in order to obtain an injunction, therefore his unintentional breach of the non-compete should not have triggered the tolling provision. The appellate court held that nothing in Florida Statute § 542.335 suggested that an “intentional breach” was a precondition to relief. Even assuming that intent would have been relevant, the appellate court held that Gordon’s breaches of the non-compete clauses were a sufficient basis to toll the six-month restrictive period and enjoin Gordon from working for Highland. Proudfoot Consulting Company, v. Gordon held that the fact that an employee may have reasonably erred in determining the scope of the non-compete clause did not grant him license to work for a competitor in violation of the employment agreement.
The appellate court reversed the trial court’s determination of damages but did not disturb the injunction entered against Gordon.
Peter Mavrick is a Miami non-compete attorney. This article does not serve as a substitute for legal advice tailored to a particular situation.