The Mavrick Law Firm has successfully represented clients in many non-competition covenant cases. Most cases involved representing the new business, employer, and former employee threatened with a lawsuit. Non-competition covenants often can be successfully challenged on the grounds that they are invalid or overbroad.
Non-compete contracts contravene Florida’s general public and statutory policy encouraging free enterprise and competition. They are allowed as an exception to that policy under certain circumstances. They can be enforced lawfully and bar former employees from competing or working for a competitor. Whether a particular non-compete covenant is enforceable requires examination of the wording of the non-compete contract, the background and details of the employment relationship leading to the departure of the employee, and the legal basis for the non-competition contract under Florida statutory and case law. Peter Mavrick is a Fort Lauderdale non-compete lawyer who regularly represents clients in non-compete litigation.
Non-compete cases arise in several contexts. Former employers often file cases against former employees and their new employers alleging breach of non-competition covenants, and the Mavrick Law Firm has successfully defended the new business or new employer. These cases are often on short-notice and require a rapid understanding of the case facts and legal analysis and an appearance in court at a temporary injunction hearing on whether the court should order immediate closure of the new business or termination of the former employee by his or her new employer. Cases arise in other contexts too. Sometimes former employees have started their own business in competition with the former employer, and then they receive a threatening letter from a law firm demanding that the new business stop competing. Sometimes the former employer interferes with the business relationships of the new business formed by the former employees. The Mavrick Law Firm has successfully represented many start-up businesses by initiating litigation against the former employer and asking the court to determine that the non-competition contract is invalid and stop the interference with business relationships of the new business. Finally, The Mavrick Law Firm also has successfully represented employers by preparing non-competition contracts and enforcing non-competition contracts.How Non-Compete Cases are Handled
Legal representation begins fundamentally with listening to the client. It is the client’s objective that needs to be satisfied. Attorney Peter Mavrick begins by reviewing the non-compete contract carefully along with any other related employment or business contracts. Mr. Mavrick meets with the client to ascertain all case facts and determine what further additional documents and witnesses will be needed or helpful to the representation. It is critical to the representation to understand the statutory and case law governing enforcement of non-competition contracts. Non-compete cases present mixed questions of facts and law. In many cases, non-compete contracts can be invalidated because other laws have been violated. For example, in a recent case in the health-care industry, Mr. Mavrick was able to prove violations of health-care and insurance statutes that invalidated the non-compete contract. In other cases, Mr. Mavrick was able to prove highly relevant violations of labor laws that invalidated the non-compete contract and formed the basis of a counterclaim. For this same reason, when Mr. Mavrick represents clients seeking to enforce non-compete contracts, he carefully examines the facts to ensure enforceability and then prepares the case to stop the unlawful competition.
Non-compete covenant cases often move quickly, and trial court Judges need to make decisions without the benefit of full discovery. In order to obtain a temporary injunction, the plaintiff is required to establish (1) the likelihood of irreparable harm, (2) the unavailability of an adequate remedy at law, (3) substantial likelihood of success on the merits, and (4) that the injunction will serve the public interest.
In a great deal of non-compete litigation, the battle is over whether the plaintiff has a “substantial likelihood of success on the merits.” The Mavrick Law Firm has successfully challenged non-compete contracts because the contract is itself invalid or has been rendered invalid due to conduct of the plaintiff after the covenant was signed. Businesses violate various laws that can invalidate the non-competes. Often the non-competes are not worded in a manner that will allow enforcement. Sometimes there is no legitimate business interest in the non-compete and therefore there can be no injunction to enforce the non-compete contract.Valid Non-Compete Agreements Under Florida Law Can Prohibit Only “Unfair Competition” Not “Ordinary Competition”
Florida Statutes section 542.335 governs restrictive covenants, also called “non-compete” covenants. Section 542.335(1)(a), Florida Statutes, requires that “[t]he person seeking enforcement of a restrictive covenant shall plead and prove one or more legitimate business interests justifying the restrictive covenant.” Case law interpreting the statute states that “ordinary competition” is not prohibited, and the statute allows enforcement of a non-compete covenant only when there is “unfair competition.” In White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 774,784–85 (Fla. 2017), the Florida Supreme Court explained in pertinent part:
…[A] “legitimate business interest” is an identifiable business asset that constitutes or represents an investment by the proponent of the restriction such that, if that asset were misappropriated by a competitor (i.e., taken without compensation), its use in competition against its former owner would be “unfair competition.” Put another way, a “legitimate business interest” is a business asset that, if misappropriated, would give its new owner an unfair competitive advantage over its former owner …Section 542.335 does not protect covenants ‘whose sole purpose is to prevent competition per se’ because those contracts are void against public policy. Colucci, 918 So.2d at 440. For an employer to be entitled to protection, ‘there must be special facts present over and above ordinary competition’ such that, absent a non-competition agreement, ‘the employee would gain an unfair advantage in future competition with the employer.’Legitimate Businesss Interests Supporting A Florida Non-Compete Contract
Florida’s non-compete statute specifically states that a non-compete “not supported by a legitimate business interest is unlawful and is void and unenforceable.” The meaning of what is a “legitimate business interest” has been the source of a great deal of litigation. Florida’s non-compete statute does not define all possible “legitimate business interests,” but the statute does state that the following will qualify as legitimate to enforce a non-compete:
- “Trade secrets” as defined by separate Florida statute;
- Valuable confidential business or professional information that does not otherwise qualify as trade secrets;
- Substantial relationships with specific prospective or existing customers, patients, or clients;
- Customer, patient, or client goodwill; and
- Extraordinary or specialized training.
Businesses often try to enforce non-competes against former employees by relying on exaggerated claims that they provided “extraordinary or specialized training” to satisfy the statutory requirement of a legitimate business. However, employer training is common for most jobs. Indeed, many jobs require continuing education. The legal issue for courts is whether the training qualifies as “extraordinary” or “specialized.”
Some litigants have tried to mislead courts based on cases interpreting the predecessor to the current non-compete statute regarding what level of training is needed to support a non-compete agreement. For example, some litigants have tried to rely on a 1996 Florida appellate court decision in Dyer v. Pioneer Concepts, Inc., 667 So.2d 961 (Fla. 2d DCA 1996), which interpreted the predecessor non-compete statute (F.S. 542.33) and not the current non-compete statute (F.S. 542.335(3)) that governs non-compete contracts entered after July 1, 1996. Although the former non-compete statute (F.S. 542.33) did not reference training, case law held that only “extraordinary” training would justify a non-compete. The current and applicable non-compete statute added the word “specialized” training as a ground to support a non-compete; this is distinct from and supplemental to “extraordinary” training. F.S. 542.335(1)(b)(5) (“extraordinary or specialized training”).
Two Florida appellate courts have interpreted current non-compete statute and its use of the term “specialized training.” These courts have held that the “specialized training” can exist when the employer made a substantial investment in training the employee. Balasco v. Gulf Auto Holding, Inc., 707 So.2d 858 (Fla. 2d DCA 1998), held that the non-compete “was necessary to protect the substantial investment Courtesy makes in specialized training for its sales staff” based on testimony from the employer that (1) “when productive [sales] associates leave they are replaced with ‘raw recruits’ who may take up to six months to develop’” and (2) the non-compete agreement “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.” Similarly, Aero Kool Corporation v. Oosthuizen, 736 So.3d 25 (Fla. 3d DCA 1999), held that the employer had “a legitimate business interest in the extensive, specialized training in aircraft component repair that it provided” to its employee:
"Prior to this employment, Oosthuizen had worked in a restaurant and had no experience or training in aviation repair. Aero Kool providedOosthuizen with over 195 hours of specialized training, enabling him to become skilled in repairing and overhauling aircraft components, particularly heat exchangers. He received a Temporary Airman Certificate from the Federal Aviation Administration (FAA), authorizing him to exercise the privileges of a Repairman “for manager of Heat Exchanger and accessories [while] employed by Aero Kool.”An Employer's Breach May Release the Covenant Not to Compete
When an employer seeks a temporary injunction to enforce a noncompete provision of an employment agreement, it is asking the court to force its former employee stop engaging in the alleged harmful conduct for a specified period. The injunction will be granted if it is determined that the former employee breached the valid non-compete agreement. However, the court can deny that injunction if the employer committed the first breach of the employment agreement. This legal principle is called “material breach” and means that a party who failed to perform its own contractual obligations is not entitled to enjoin a breach of the same contract by another. Peter Mavrick has successfully represented clients in Fort Lauderdale, Miami, and Palm Beach based on prior material breach by a former employer.
Florida Statute § 542.335(1)(g)(3) provides that, “[i]n determining the enforceability of a restrictive covenant, a court…[s]hall consider all other pertinent legal and equitable defenses.” In the case of Benemerito & Flores, M.D.’s, P.A. v. Roche, 751 So. 2d 91 (Fla. 4th DCA 1999), a medical professional association sought a temporary and permanent injunction enjoining Dr. Roche, its former employee, from practicing in the St. Lucie areas as well as liquidated damages for her alleged breach of a noncompete covenant.
At the hearing on the employer’s petition for temporary injunction, Dr. Roche asserted that she was relieved of her obligations under the agreement with the association because the association breached the employment agreement first by failing to pay her the contractually agreed upon bonuses. Her evidence showed that her employer failed to fully compensate her pursuant to the bonus structure in her employment agreement, which was to be calculated from all of the dialysis services she performed for the association. The employer maintained that her bonus would be calculated only on her services to patients that she personally admitted into the hospital. Dr. Roche testified that she would not have agreed to the contract had she known that was the condition to her earning the bonus. Since it is the party seeking a temporary injunction that has the burden to prove that they have a clear right to the relief requested, the trial court denied the employer’s motion for failing to meet that burden. The employer made a material breach of the employment agreement when it failed to correctly calculate Dr. Roche’s bonus, so the employer was not entitled to a temporary injunction.
The association appealed the ruling, but the appellate court affirmed the trial court’s decision. The appellate court held that because the employer materially breached the employment agreement first, Dr. Roche was relieved from the obligation of non-compete contract. The employer had refused to credit Dr. Roche for all dialysis services that she performed, and therefore the employer committed the first breach of the employment agreement. Therefore no injunction would be entered.
It is important to note that a former employer’s failure to make payments under an employment agreement is not always a complete defense to an action to enforce a noncompete provision. To reach this conclusion, the court must determine that the parties’ obligations under the agreements were “dependent” covenants. Breach of a dependent covenant renders the entire contract unenforceable. By contrast, an independent covenant does not have such an impact. Whether the payment obligations under the employment agreements were dependent or independent covenants is an issue of law that turns on the proper interpretation of the contract. Courts will analyze the plain wording of a contract and consider the issue in the context of the entire agreement in order to achieve a reasonable construction to accomplish the intent and purpose of the parties. For example, in Richland Towers, Inc. v. Denton, 139 So. 3d 318, 321 (Fla. 2d DCA 2014), the contract specified that each restrictive covenant on the part of the employee in that agreement shall be construed as a covenant independent of any other covenant or provision of the agreement or any other agreement that the corporation may have. The appellate court held that the plain wording of the contract made the employer’s breach an independent breach. It therefore was not a defense to enforcement of the agreement.Challenges To Non-Compete Injunctions by Showing There is Neither Irreparable Harm Nor Inadequate Remedies at Law
However, even if a plaintiff establishes it is likely to succeed at trial that it has a valid non-compete contract that was breached, challenges are often made as to the issues of irreparable harm and inadequate remedies at law.
Florida’s non-compete statute states in pertinent part that “[t]he violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant.” § 542.335(1)(j). To rebut the presumption, the defendant must establish “the absence of injury,” as a Florida appellate court explained inDePuy Orthopaedics, Inc. v. Waxman, 95 So.3d 928, 939 (Fla. 1 st DCA 2012). Lack of injury is not always the same as absence of monetary loss. The Supreme Court of Florida in Miller Mech., Inc. v. Ruth, 300 So.2d 11, 12 (Fla. 1974), explained that in cases involving a violation of a covenant not to compete, “the normal remedy is to grant an injunction … because of the inherently difficult, although not impossible, task of determining just what damage actually is caused by the employee’s breach of the agreement.”
Sometimes plaintiffs can establish lost business, and then defendants argue that this proves there is an “adequate remedy at law” and therefore there should be no injunction. However, courts have held that there can still be an injunction even when monetary damages are ascertainable. Courts have explained that plaintiffs do not have an adequate remedy at law for the irreparable harm they suffered and may continue to suffer where monetary damages are difficult to prove with any certainty or, even if provable, would not adequately compensate for all aspects of the violation of the covenant not to compete. In Variable Annuity Life Ins. Co. v. Hausinger, 927 So.2d 243, 245 (Fla. 2d DCA 2006), the appellate court reversed a trial judge’s denial of a temporary injunction even though “monetary damages were ascertainable to some clients that ‘the former employee] admittedly solicited.” The appellate court explained that “the harm presumed under the [non-compete] statute includes the potential damages to [the plaintiff’s] longstanding relationships with its customers and the protection of confidential client information.” By contrast, the Fourth District Court of Appeal reached a much different result inFirst Miami Securities, Inc. v. Bell, 758 So.2d 1229 (Fla. 4 th DCA 2000). There the trial court denied the former employer’s motion for a temporary injunction because it was unable to establish a presumption of irreparable harm as actual damages could be proven. The appellate court affirmed the trial court’s decision to deny the temporary injunction. Peter Mavrick is a Fort Lauderdale non-compete attorney.
Sometimes challenges are made to the lack of a public interest in supporting an injunction. Under Florida’s non-compete statute, the existence of a statutory “legitimate business interest” usually will satisfy the public interest prong to obtain a temporary injunction. In Atomic Tattoos, LLC v. Morgan, 45 So.3d 63, 66 (Fla. 2d DCA 2010), the court explained that “[a] finding that a covenant ‘protects a legitimate business interest is also important to public interest considerations.’” However, a public interest can override enforcement of a non-compete agreement. Under Florida’s non-compete statute, § 542.223(1)(i), a court must specify the public policy requirements that “substantially outweigh the need to protect the legitimate business interest or interests established by the person seeking enforcement of the restraint.” An example might be a patient’s right to see the physician of his or her choosing irrespective of the existence of a non-compete covenant because there may be serious medical issues at stake that could affect other public policies concerning patient health.Tortious Interference Claims In The Context Of Florida Non-Compete Contracts
Under Florida law, courts generally will not allow lawsuits asserting tortious interference with a contract that is terminable at will. Courts reason that there is only an expectation that the relationship will continue and this is not sufficient for a tortious interference claim. See, for example, Ferris v. South Fla. Stadium Corp., 926 So.2d 399 (Fla. 3d DCA 2006) (generally there is no claim for tortious interference with an at-will contract). However, Florida law recognizes an exception in the context of a former employer who wishes to bring a lawsuit against a new employer for tortious interference with a non-compete contract between the former employer and its employee, even if the employee was terminable at-will. Under Florida law, continued employment constitutes sufficient consideration for a binding non-compete contract between an employer and an at-will employee.
Florida courts also have held that a new employer can be subject to an injunction enforcing a non-compete contract against an employee who previously signed a non-compete contract with a former employer. Florida courts have held that it does not matter that the new employer never was a party to the non-compete contract.
This is what happened in Temporarily Yours-Temporary Help Services, Inc. v. Manpower, Inc. , 377 So.2d 825 (Fla. 1st DCA 1979), where the employer, Manpower, Inc., sought an injunction against former employee, Edward Jones, to prevent him from competing with Manpower for a 2-year period within a 200-mile radius as per the non-compete. Shortly after Jones was fired by Manpower, he helped organize a corporation, Temporarily Yours-Temporary Help Services, Inc., in direct competition with Manpower. He solicited Manpower’s clients, some of whom began to do business with Jones. Consequently, Manpower sought recovery against Jones and Temporarily Yours and the trial court entered the injunction against same.
The non-compete in part stated that Jones would not “…directly or indirectly, on your own account or as agent, stockholder, employer, employee or otherwise, engage in competition in a business similar to that of Company or division to which you are assigned by virtue of this agreement…”. To be entitled to an injunction when a covenant not to compete has been violated, the plaintiff need only prove the existence of the contract, intentional and material breach of the contract and no adequate remedy other than injunctive relief. Manpower was able to prove that a contract between it and Jones existed and that Jones’ breach of the non-compete was intentional and harmful to its business interests and the only remedy available to it was an injunction. The trial court agreed. On appeal, Jones argued the trial court erred as to the injunction against Temporarily Yours because it was not a party to the non-compete and Jones did not own the corporation or have any proprietary interest therein. The appellate court disagreed with Jones and affirmed the trial court judgement. It found that the injunction not only bound Jones, but also those persons or entities associated with him in interest, in privity with him, represented by him or subject to his control. Jones admitted that he was president of Temporarily Yours, and the only operating officer. While he was not a stockholder, he could purchase stock in the corporation. Under these circumstances, the appellate court held the injunction was properly issued against Jones and Temporarily Yours because the corporation existed for the purpose of aiding and assisting Jones in violating his covenant not to compete.
While Temporarily Yours is an older case (1979), more recent court holdings maintain the court’s stance in Temporarily Yours. In Dad’s Properties, Inc. v. Lucas , 545 So.2d 926 (Fla. 2nd DCA 1989), the facts were very similar to that of Temporarily Yours. Al Lucas (seller) entered into an agreement with Dad’s Properties (buyer), which included a non-compete provision whereby, “[f]or a period of five (5) years after the date of closing, within a radius of fifty (50) miles, the sellers agree that they will not engage in the live adult entertainment business, either directly or indirectly, as an individual, partner, employee, stockholder, or consultant.” A year later, Susan Lucas, wife of Al Lucas, formed Martus, Inc., which began operating a business, Fountain Blue, which competed directly with Dad’s Properties. Mrs. Lucas was the sole shareholder, director and officer of Martus, Inc. and Mr. Lucas worked was the manager of Fountain Blue and exerted considerable control over the design and operation of Fountain Blue and he and Mrs. Lucas solicited employees of Dad’s Properties. Dad’s Properties filed an action against the Lucas’ and Martus seeking to enjoin them from breaching the non-compete. The Lucas’ asserted that Mrs. Lucas and Martus were not bound by the same because only the parties to the covenantwere restricted from competing with Dad’s Properties. However, Florida's Second District Court of Appeal held otherwise and stated, “individuals and entities may be enjoined from aiding and abetting a covenantor in violating a covenant not to compete” and “an injunction not only binds the parties but also those identified with them in interest, in privity with them, represented by them or subject to their control.” The appellate court therefore upheld the injunction.Florida Non-Compete Defense: No Liability When Former Employee Was "Predisposed" To Breach His Promise Not To Compete
Courts require that the former employer prove four elements for a tortious interference claim: (1) existence of a business relationship; (2) knowledge of the relationship on the part of the defendant; (3) an intentional and unjustified interference with the relationship with the defendant; and (4) damages to the plaintiff as a result of breach of the relationship.
Successful defense of such claims often attack all elements of the claims. Frequently the new employer does not even know there was a non-compete before hiring the new employee and never “intentionally” or “unjustifiably” interfered with the non-compete contract. Usually damages are difficult for the former employer to prove.
Former employers often bring these tortious interference claims against the new employer to impose maximum leverage against the former employee. In a nutshell, the former employer is trying to get the new employer to fire the employee, i.e., terminate the employment relationship so that the former employee suffers economically. Often, the former employer tries to tortiously interfere with the new employer’s business relationship with the former employee.
Florida recognizes the unusual defense of “predisposition” of the former employee to breach the non-compete. When the new employer proves such “predisposition,” there can be no valid claim of tortious interference.
For example, in the case of Fiberglass Coatings, Inc. v. Interstate Chemical, Inc., a Florida trial court judge ruled in favor of the new employer and dismissed the tortious interference claim brought by the former employer based on hiring the employee who had a non-compete contract. The noncompete covenant that was the genesis of this lawsuit prohibited Robert Hutchens, FCI’s former employee, from being employed by or acting as an agent of any business which competed with FCI within the state of Florida for a year after his employment with FCI ended. Mr. Hutchens left FCI’s employ in March 2002. Within a few weeks, he began working for Polymeric, a competitor of FCI, but stayed there only a short time. A few months later, Interstate, which was a competitor of FCI, hired him as a salesman. Thereafter FCI sued Mr. Hutchens for breach of the non-compete contract and also sued Interstate for tortious interference with that contract.
Interstate successfully defended by claiming that as a matter of law it could not be liable for tortious interference because Mr. Hutchens was predisposed to breach his covenant not to compete. Interstate based its defense on the undisputed fact that Mr. Hutchens had intervening employment with Polymeric. In other words, Interstate argued that because Mr. Hutchens already showed his intention to breach his non-compete by working for another employer before his employment with Interstate, Mr. Hutchens never intended to abide by the non-compete and Interstate cannot be liable for Mr. Hutchens' actions. In its order granting Interstate’s motion for summary judgment, the trial judge agreed. The trial judge concluded that the employee had a predisposition to breach is contract with FCI and, as a result, Interstate did not cause or induce him to breach the contract’s covenant not to compete.FCI appealed
The appellate court affirmed the trial court and stated that “Interstate merely entered into an employment agreement with Hutchens knowing that he could not honor his covenant not to compete with FCI and at the same time work for Interstate.” The appellate court explained that FCI could not prove the required element of “causation” to win on its tortious interference claim. Causation requires a plaintiff to prove that the defendant manifested a specific intent to interfere with the business relationship. The new employer will not be held liable unless it is established that the new employer intended to procure a breach of the contract. The appellate court explained that “[o]ne does not induce another to commit a breach of contract with a third person … when he merely enters into an agreement with the other with knowledge that the other person cannot perform both it and his contract with the third person.”
The information herein is not intended as legal advice, and any advice would require understanding the client’s particular legal situation.
The Mavrick Law Firm engages engages every aspect of the law and facts to persuasively present them to the court.Sample Case Results
Mr. Mavrick successfully defended a business and its owner in a lawsuit alleging breach of a non-competition covenant. At the end of the case, the non-competition covenant was invalidated and Mr. Mavrick’s client was reimbursed its legal expense.
Represented company and its owners sued by former employer corporation for breach of non-competition contract and hiring an employee of the former employer. At end of the emergency hearing the former employer set with the Judge to obtain a temporary injunction against my clients, the Judge indicated that he would rule in favor of my clients and invalidate the non-competition contract. The case later settled where the former employer corporation paid my clients’ fees and costs and an additional amount as damages.
Represented company and its owner who were sued by former employer corporation for breach of non-competition contract and theft of trade secrets. My client counterclaimed. While motions were pending with the Judge, the former employer corporation settled by dismissing its case, agreeing in writing that its non-competition contact was invalid and that no trade secrets were ever stolen by my clients, and reimbursing the attorney’s fees and costs of my clients.
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