Florida Business Litigation Lawyer Blog
An employer can protect its relationships former clients by establishing that an ongoing business relationship exists with the past client, or by presenting competent and substantial evidence to prove the existence of a substantial relationship within the meaning of § 542.335, Florida Statutes. Under Florida law, the key issue is that the court will view the relationship with the past client as a “legitimate business interest” under Florida’s non-competition covenant statute.
Employees are privy to the internal mechanics of the relationships between employers and their past clients. After leaving their employment, former employees sometimes target the employer’s customers or clients. Under Florida law, it is well-established that “the protection of former customers generally does not qualify as a legitimate business interest.” Evans v. Generic Sol. Eng’g, LLC, 178 So. 3d 114, 116 (Fla. 5th DCA 2015). However, if the employer has an agreement with a past client that establishes that the employer will return for future work, courts can view the customer as a legitimate business interest and enforce the non-compete as to the customer. See Id.
In Evans, the Fifth District Court of Appeal refused to enjoin Andrew Chinn, a former independent contractor, and his new employer X-Tech from providing services to the former employer’s past clients. Chinn entered into a non-compete agreement with his former employer, Tech Guys. The express terms of the non-compete prohibited Chinn, for 1-year, from working directly or indirectly for current or former Tech Guys’ customers after leaving Tech Guys. Despite the fact that Tech Guys proved that Chinn violated the non-compete by providing services to former Tech Guys clients RRI and E-data, the appellate court refused to uphold the non-compete agreement. The court explained that Tech Guys did not present competent, substantial evidence as to why it was necessary to enforce the non-compete agreement.
Reversing the trial court’s order that granted an injunction against Chinn and X-Tech, the appellate court found that Tech Guys did not have an “exclusive contract with RRI, nor any reasonable expectation that it would continue to provide services to RRI when its contract expired.” Moreover, the court also found that the Tech Guys cancelled the contract with RRI and therefore chose not to work with RRI. Therefore, Tech Guys could not enforce a non-compete as to the very same customer when it had previously chosen not to work with this customer. In regards to Tech Guys other past client, E-Data, the appellate court was unable to assess any protectable legitimate business interest. The appellate court explained: “Tech Guys did not provide any evidence as to when it conducted business with E–Data, the extent of its relationship with E-data, whether its relationship with E–Data was ongoing, [or] whether it had an expectancy of a continued relationship with E–Data.” For these reasons, the appellate court held that Tech Guys did not have legitimate business interests with either customer and therefore could not enforce a non-competition covenant as to either customer.
In light of the analysis in Evans, employers should not exclusively rely on a contract to prevent terminated employees from doing business with or poaching past clients. See Evans, 78 So.3d at 115; Envtl. Services, Inc. v. Carter, 9 So. 3d 1258, 1265 (Fla. 5th DCA 2009). As there is no bright line rule to prevent an employee from servicing past clients, employers who wish to prevent this behavior should consider, among other things, a combination of: (1) having a non-compete agreement that prohibits the servicing of former clients; (2) using an exclusive services agreement with their clients; (3) creating agreements that are ongoing, without a definite expiration date; and (4) maintaining competent and substantial records that demonstrate the existence of a substantial relationship that is a legitimate business interest within the meaning of § 542.335, Florida Statutes.
Peter T. Mavrick has successfully represented many businesses in non-competition covenant litigation. 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.