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'Noncompete' agreements indeed enforceable

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The Tampa Tribune

Published: February 6, 2009

I am periodically surprised by potential clients who believe covenants against competition, or more frequently "noncompete" agreements, are unenforceable. To the contrary, Florida courts routinely enforce covenants against competition. Prior to July 1, 1996, covenants against competition were only enforceable if the covenant fell into one of several enumerated categories. Covenants against competition entered into after that date need not fall into a specific category; although the employer must demonstrate a legitimate business interest that must be protected.
Legitimate business interests include trade secrets, valuable confidential business or professional information and substantial relationships such as those with clients or vendors. Customer goodwill associated with an ongoing business, geographical location or specific marketing or trade area can also qualify as a legitimate business interest entitled to protection. Specialized training the employer provides to the employee is a legitimate business interest.

Certain presumptions regarding the enforceability of covenants entered into after July 1, 1996, exist. In cases unassociated with the sale of a business, the law provides that covenants restricting competition for a period of six months or less are presumptively enforceable. The law requires the court to consider a noncompete longer than two years to be unenforceable. In both cases, however, the presumption is not absolute. A covenant against competition entered into by the seller of a business is presumptively enforceable if it is 3 years or less and presumptively unenforceable if it is longer than 7 years in duration.

Employees will often raise the defense of the employer's prior material breach of the terms of employment. To succeed, the employee must show that the covenant was a dependent covenant. That is, the employee's performance under the noncompete agreement was tied to or was dependent upon the employer's performance of its obligations. Although many covenants contain language asserting that the covenant is an independent agreement, no Florida appellate decision has yet to enforce such a waiver provision. Thus, if the employer materially breaches the agreement by failing to pay the employee, the employee may be relieved of the obligation to refrain from competing against the employer.

In some cases, particularly those involving health-care providers, the employee may offer a whistleblower defense asserting that the employer was guilty of misconduct. In legal parlance, the employee accuses the employer of "unclean hands," which the employee will contend should preclude the employer from enforcing the covenant against competition. Physicians and physicians' groups, being a particularly litigious group, often seek to enforce covenants against competition against departing physician employees. Departing doctors often defend such enforcement suits alleging that the employer physicians' group was improperly billing its patients, insurance companies or Medicare. Such employees will also seek to cast themselves as having engaged in protected whistleblower activity.

The employer may seek injunctive relief and money damages. The employer, however, must also show that it will suffer an irreparable injury if the employee's breach is to be enjoined. The court is precluded, however, from considering the employee's financial hardship if he or she is enjoined from working for a competitor of the former employee. The prevailing party is also entitled to recover attorneys' fees in either enforcing or defending against the covenant against competition.

Randall Love is an attorney with Randall J. Love & Associates, New Port Richey, and practices in the areas of employment law, commercial and real estate litigation, personal injury and probate litigation. He is a certified Circuit Court mediator.

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