FORT LAUDERDALE BUSINESS LITIGATION: THE CHOICE ACT WILL HAVE SIGNIFICANT IMPACT ON NON-COMPETE AGREEMENTS FOR HIGH WAGE EARNERS

            Florida law on noncompete agreements will likely change on July 1, 2025, under the “Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth Act” (CHOICE Act). The CHOICE Act will substantially enhance an employers’ ability to restrict certain employees from competing after their employment with the employer ends. The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent 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.

Noncompete agreements are currently governed only by Florida Statutes § 542.335. For a noncompete agreement to be valid, § 542.335 requires the agreement to be in writing, justified a legitimate business interest (such as, for example, trade secrets, valuable confidential business information, substantial relationships with customers), and reasonable in time, geographic scope, and line of business. § 542.335 sets out various presumptions regarding the reasonableness of the length of a restrictive covenant. For example, noncompete agreements involving employees are presumed reasonable if the post-employment restriction is limited to six months or less, and presumed unreasonable if the post-employment restriction exceeds two years.

The CHOICE Act significantly enhances employer protections for covered employees. Employers can prevent covered employees from competing for up to four years after the employment terminates in a specific geographic area. As a result, the CHOICE Act increases the two-year presumption period to four years. The CHOICE Act is also silent on the legitimate business interest requirement and requirement that the geographic area to be reasonable. The silence suggests employers can enforce the restrictive covenant without proving the existence of a legitimate business interests justifying enforcement of the restriction and without demonstrating the reasonableness of the geographic restriction. And the CHOICE Act seems to provide employers with an automatic right to a preliminary injunction because employers need only make an application to the court for a preliminary injunction and the court must issue that preliminary injunction. The injunction can only be dissolved if the employee proves by clear and convincing evidence that he or she will not compete with the employer, will not use the employer’s confidential information, will not use the employer’s customer relationships, will not compete in the specified geographic area, or was not paid by the employer.

            The CHOICE Act also permits the use of “garden leave agreements.” These agreements are similar to noncompete agreements in that they can prevent employees from competing post-employment. In a garden leave agreement, the employer and employee agree that the employee will give a certain amount of notice (up to four years) before the employee can resign. During that period, the employee continues to receive his or her full salary but is prohibited from using the employer’s confidential business information and customer relationships. This has the same effect  a post-employment noncompete agreement except the employee technically remains employed although he or she is not performing any work and continues to receive a salary.

The CHOICE ACT does apply to all employees. To be covered under the Act, the employee must earn, or be reasonably expected to earn, a salary exceeding twice the annual mean wage of the county in Florida where (1) the employer has its principal place of business or (2) the employee resides if the employer’s principal place of business outside Florida.  Therefore, high earning employees are more likely to be covered by the ACT than lower wage earners.

The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent 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.