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Florida Noncompetes

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By Deborah F. Hogan, Esq.

There has always been a list of great reasons to live in Florida and the list keeps growing.  Most recently, the difference between states with state income tax and those without it became more glaring with the cancellation of a federal deduction for state income taxes an individual paid.  Florida workers, having no state income tax, were the beneficiary of this change in the law.

Florida is also a great place to operate your business.  Businesses formed in Florida enjoy one of the country’s best statutes to protect against wrongful competition.  We’re lucky for that. And we are lucky that the Florida Supreme Court continues to do defend its statute despite attacks from distant states, most notably New York and California.

As recently as September, 2017 the Florida Supreme Court upheld Florida’s non-compete statute, F.S. 542.335. In general, noncompete agreements are contractual agreements wherein an employee promises not to compete with his or her employer’s business during employment and for a specified time after the termination of such employment.  Florida allows employers to restrict any action that interferes with its legitimate business interests including: trade secrets, valuable confidential information; substantial relationships with customers, patients and clients; good will and specialized training.

Fla’s statute comes under attack more often than others because it has been deemed pro-employer.  Probably the most criticized are the provisions that prevents courts from considering the harm to the employee or from construing the agreement more narrowly against the employer.  For example, New York’s highest state court in Brown & Brown v Johnson refused to enforce a non-compete intended to be interpreted under Florida law on grounds that the statute failed the “truly obnoxious test’.  It is hard to plan for a decision that is based on personal opinion rather than the written law. Certain Federal Courts have overlooked Florida’s written statute as well on the grounds that it conflicted with their ‘federal rules of civil procedure’ thus refusing to allow injunctive relief even though the employee contractually agreed to it when he accepted with work.

The 2017 Florida Supreme Court opinion in White v Mederi Caretenders (a home health agency) attempted to address the criticisms by  noting that reasonableness is the primary standard by which courts should judge the enforceability of a non-compete agreement.  The Supreme Court conceded that because reasonableness is the standard, Florida Courts have wide discretion to fashion appropriate context-dependent remedies.  This means that they can judge whether the restrictions imposed are too cramping based on the specific facts and circumstances of each case. This, in turn, means that every case will turn on its facts, and there is no definitive language which you can craft which is bullet-proof.

So, is your non-compete worth the paper it is written on?  We still say ‘yes’. You have a better than not chance that Florida courts will not toss it out so long as the agreement complies with the simple rule of reason:  Don’t take more than you need.

Restrictive covenants that are upheld include those whose geographic area of restraint does not overly burden a person’s ability to earn a living after termination of employment, or in the case of physicians governed by the American Medical Association, do not bring harm to its patients such as when a patient has few specialist to choose from as in rural settings.  While Florida employers remain free to restrain any legitimate business activity, when deciding what restrictions to impose, and for how long, in order to avoid misguided construction by selected courts, employers are advised to scrutinize their restrictive covenants through the lens of reason.