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.
Some Florida courts narrowly construe Section 542.335 when analyzing whether a legitimate business interest exists. For example, in University of Florida, Board of Trustees v. Sanal, Florida’s First District Court of Appeal First District, narrowly construed the “specific prospective patients” wording in Section 542.335 and held a non-compete agreement was unenforceable. 837 So. 2d 512 (Fla. 1st DCA 2003). Sanal looked to the “clear and unambiguous” language of the phrase “specific prospective patients” in concluding that Florida law limited the restrictive covenant only to specific patients, not prospective patients. University of Fla. Board of Trustees v. Sanal, 837 So. 2d 512 (Fla. 1st DCA 2003). In Florida Hematology & Oncology v. Tummala, Florida’s Fifth District Court of Appeal extended the analysis in Sanal by holding that referral sources for prospective unidentified patients are not legitimate business interests under a strict application of Section 542.335, because the statute requires a “substantial relationship” with a “specific” prospective patient. 927 So. 2d 135 (Fla. 5th DCA 2006).
By contrast, in Infinity Home Care, L.L.C. v. Amedisys Holding, LLC, Florida’s Fourth District Court of Appeal explained that Section 542.335 “clearly states that the legitimate business interests listed in the statute are not exclusive,” which therefore “allows the Court to examine the particular business plans, strategies, and relationships of a company in determining whether they qualify as a business interest worthy of protection.” Infinity Home Care, L.L.C. v. Amedisys Holding, LLC, 180 So. 3d 1060 (Fla. 4th DCA 2015). Infinity ultimately reasoned that relationships with specific referral sources were a legitimate business interest because the healthcare business “carefully cultivates these relationships over time and heavily depends upon them as a source of business.” Infinity Home Care, L.L.C. v. Amedisys Holding, LLC, 180 So. 3d 1060 (Fla. 4th DCA 2015).
Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.