MIAMI NON-COMPETE AGREEMENT: FLORIDA MAY BE REPEALING ITS NON-COMPETE STATUTE

Florida’s general rule prohibits contracts impeding commerce. Fla. Stat. § 542.18. (“Every contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful.”). However, Florida’s legislature passed house bill 611 and 375 in the mid-1990’s to create an exception for restrictive covenants like non-compete agreements, non-solicitation agreements, and confidentiality agreements under certain circumstances. C.S.H.B. 611 & 375 (authorizing enforcement of reasonable restrictions and providing the criteria for enforcing those restrictions). The statue was amended several times over the years, but its basic composition remains the same. A plaintiff can enforce a written restrictive covenant if he or she pleads and proves the existence of a legitimate business interest justifying enforcement of that restrictive covenant. Fla. Stat. § 542.335 (“The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.”). Assuming a plaintiff demonstrates the existence of a written restrictive covenant and a legitimate business interest justifying enforcement of that restriction, the burden shifts to the defending party to demonstrate his or her violation of the restrictive covenant does not harm the plaintiff. Fla. Stat. § 542.335 (“The violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant.”); Don King Productions, Inc. v. Chavez, 717 So. 2d 1094 (Fla. 4th DCA 1998) (“[P]resumptions are rebuttable ‘unless conclusive under the law from which they arise.’ Thus, it seems to us that unless the legislature specifically designates a presumption as conclusive, it is rebuttable under this section.”). The Miami 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.

Enforcing restrictive covenants in Florida was briefly called into question when the Federal Trade Commission adopted a rule banning most restrictive covenants. The rule would have had substantial impact nationwide and may have nullified Florida’s restrictive covenant statute. However, a month before the FTC’s rule went into effect, the Federal District Court for the Middle District of Florida issued a limited preliminary injunction barring the FTC from enforcing its rule against the plaintiff in that lawsuit. Properties of the Villages, Inc. v. FTC, 2024 WL 3870380 (M.D. Fla, Aug. 15, 2024) (“The Court will enter a preliminary injunction prohibiting enforcement of the final rule as to the Properties of the Villages, Inc.”). Several days later, the Federal District Court for the Northern District of Texas issued a nationwide injunction prohibiting the FTC from enforcing its rule against restrictive covenants. Ryan LLC v. FTC, 2024 WL 3879954 (N.D. Tex., Aug. 20, 2024) (The “Court hereby holds unlawful and sets aside the Rule… The Rule shall not be enforced or otherwise take effect on its effective date of September 4, 2024, or thereafter.”). These two decisions, combined with subsequent litigation, prevented the FTC from banning restrictive covenant statutes like the one Florida enacted about three decades ago.

Proposed Florida House Bill 11777 seeks to breath new life into the FTC’s rule by prohibiting enforcement of restrictive covenants in Florida. Section 6 of the Bill seeks to repeal Florida Statute § 542.335 in its entirety. Section 2025 Florida House Bill No. 1177, Florida One Hundred Twenty-Seventh Regular Session. The language of the Bill is brief but unambiguous, “Section 542.335, Florida Statutes, is repealed.” If the proposed Bill is passed in its current form, restrictive covenants would probably be unenforceable throughout Florida. However, we do now know whether the Bill will pass or whether Section 6 of the Bill will remain unaltered if passed. Only time will tell.

The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.