Florida’s Non-Competition Covenant Statute, Section 542.335, lays out the requirements for enforceable restrictive covenants. One of the main requirements pursuant to subsection (b) of the statute is that the party seeking to enforce the restrictive covenant must plead and prove the existence of one or more “legitimate business interests” justifying the restrictive covenant. The Miami non-compete attorneys at the Mavrick Law Firm have successfully defended start-up businesses and their owners against lawsuits seeking to enforce such covenants. Subsection (b) provides a list of potential legitimate business interests that could justify the existence a restrictive covenant, stating in pertinent part:
The term “legitimate business interest” includes, but is not limited to:
1. Trade secrets, as defined in s. 688.002(4).
2. Valuable confidential business or professional information that otherwise does not qualify as trade secrets.
3. Substantial relationships with specific prospective or existing customers, patients, or clients.
4. Customer, patient, or client goodwill associated with:
a. An ongoing business or professional practice, by way of trade name,trademark,service mark,or “trade dress”;
b. A specific geographic location; or
c. A specific marketing or trade area.
5. Extraordinary or specialized training.
Although the statute provides this list of potential legitimate business interests, the list, by its own wording, is non-exhaustive. As such, businesses may plead other legitimate business interests that a court could find sufficient to justify restrictive covenants contained in their agreements. This was the case in Balasco v. Gulf Auto Holding, Inc., 707 So. 2d 858 (Fla. 2d DCA 1998).
In Balasco, a former employee appealed the trial court’s entry of an injunction in favor of his former employer, Courtesy Toyota (“Courtesy”), based on a restrictive covenant contained in the subject employment agreement. One of the employee’s arguments was that the court failed to consider whether the restrictive covenant sought to protect a legitimate business interest. However, Courtesy’s president testified at the injunction hearing concerning the necessity of the agreement. According to Courtesy’s president, “rather than recycling sales personnel from other dealerships, Courtesy hires personnel with little or no sales experience and invests considerable money and time to teach them the Courtesy way of selling cars. This investment includes the expense of a full-time, in-house training manager, as well as outside trainers. Courtesy’s president explained that the restrictive covenant “was intended to prevent substantial drops in production triggered by the loss of experienced sales associates who are lured away by managers formerly employed by the dealership.” Courtesy’s president further testified that “when productive associates leave they are replaced with ‘raw recruits’ who may take up to six months to develop…[and] that losing experienced sales associates has a negative impact on Courtesy’s productivity, which in turn diminishes staff compensation and morale.” Based on this testimony, Florida’s Second District Court of Appeal held that “the agreement furthers the legitimate business interests of promoting productivity and maintaining a competent and specialized sales team.”
The Second DCA’s decision in Balasco provides assurance for businesses who utilize non-compete agreements that such agreements can be upheld even if they are not supported by the legitimate business interests enumerated in Section 542.335, Fla Stat., supra. Pleading and proving the existence of legitimate business interests will differ for each business and will depend on factors such as the relevant industry and competition therein, the types of customers or clients dealt with, or the specific duties of the employee bound by the restrictive covenant, among other things. If you have questions regarding potential legitimate business interests that could justify your restrictive covenants or restrictive covenants you may be bound by, the Miami non-compete attorneys at the Mavrick Law Firm are available to answer such questions.
The Mavrick Law Firm has successfully represented many businesses in Florida non-competition covenant litigation in the Miami-Dade, Broward, and Palm Beach County areas encompassed by the Third and Fourth District Courts of Appeal, as well as Hillsborough, Sarasota, and other counties encompassed by the Second Circuit Court of Appeal. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.