Are Non-Compete Clauses Enforceable in Florida?

Are Non-Compete Clauses Enforceable in Florida?

Businesses regularly obtain or create through various relationships and deals sensitive information they want to protect

July 29, 2022

Florida’s non-compete statute covers “valid restraints of trade or commerce.” It protects the state’s employers or businesses who are looking to safeguard their company’s goodwill, trademarks, and the like. A good, enforceable non-compete agreement balances an employee’s right to earn an income with a business’s right to protect its customer relationships, intellectual property, and more.

What Is a Non-Compete Agreement Under Florida Business Law?

Businesses regularly obtain or create through various relationships and deals sensitive information they want to protect. A Florida non-compete agreement is a standard contract that protects your company’s confidential information by preventing others, typically former employees, from engaging in conduct that harms your business. The law is based on the principle that, after your company has hired, trained, and paid someone, they should not be permitted to undermine your business by using confidential information to compete against you.

A non-compete agreement serves several functions, restricting current and former employees from:

  1. Working in a competitive business.
  2. Soliciting your current employees or vendors.
  3. Soliciting your customers.
  4. Sharing your business’s confidential information.

Florida business law recognizes a non-compete clause’s validity, though there are certain limitations and restrictions.

What Constrains or Voids a Non-Compete Agreement in Florida?

While a Florida business can limit an employee’s ability or right to compete, it must comply with specific requirements for the non-compete agreement to be enforceable. Most importantly, the non-compete clause must be “reasonably necessary to protect a legitimate business interest.” Its restrictions must also be reasonable concerning geographical area and time, with courts generally enforcing those limiting competition for up to two years.

If you choose to use non-compete clauses to safeguard your business, it’s crucial to get sound legal advice from a business law attorney, so your rights are fully protected.

Drafting Non-Compete Agreements Under Florida Business Law

As noted above, a non-compete agreement must identify at least one “legitimate” business you seek to protect. If in the course of a court action, the court finds there’s no legitimate business interest, it cannot enforce the non-compete clause, and the enforcing party will not prevail.

Section 542.335 of the Florida Statutes lists five “legitimate” business interests categories.

  1. Trade secrets
  2. Confidential information
  3. Customer relationships
  4. Customer goodwill
  5. Specialized training

This list is non-exclusive, meaning you can also include other legitimate business interests in a non-compete agreement. Also, the non-compete agreement can (and probably should) list more than one legitimate business interest you want to protect.

When drafting a non-compete clause, it’s essential to not overreach, as a court could then find the agreement is unreasonable. For instance, if you want to use a non-compete clause to protect customer relationships or deals you have with Florida customers, it’s typically not helpful to list every state in the country as the geographic region for enforcement.

Section 542.335 also provides several rebuttable presumptions of how long an enforcement period should last for a non-compete agreement. For example, the courts generally agree that a non-compete agreement between a business’s seller and buyer should endure for three years or less. If you include an enforcement duration of seven years or more, the court is less likely to find the clause enforceable. That doesn’t mean 10-year non-compete agreements are unenforceable. You would, however, need to prove to the court why such a term is not unreasonable.

Lastly, even when a court finds a provision in a non-compete agreement to be too long in duration, overly broad in scope, or otherwise unenforceable, it may still enforce a less restrictive form of it. Commonly referred to as “blue-penciling,” this means the court can modify terms to a no-compete agreement to protect your legitimate business interests. As laid out in Section 542.335(c):

If a contractually specified restraint is overbroad, overlong, or otherwise not necessary to protect the legitimate business interest or interests, a court shall modify the restraint and grant only the relief necessary to protect such interest or interests.

How To Enforce Non-Compete Clauses Based on The Protection of Goodwill

Florida’s non-compete laws protect business interests in customer relationships and goodwill.

While there’s no precise or uniformly-accepted definition of “goodwill,” court opinions have refined the term’s meaning over time. Professional service providers, attorneys, and the courts must generally rely on case facts and case law to determine whether a non-compete clause is enforceable based on a legitimate business interest in its goodwill.

That said, the accepted definition of goodwill is as an asset that confers on its holder a reasonable expectation of greater than usual business or earnings. Florida courts tend to agree with this general definition, defining goodwill as the “ability of a business to generate supra-normal revenue,” or the excess profit a company makes above the minimum necessary to keep it in business.

Still, the recent decision of Ansaarie v. First Coast Cardiovascular Institute, P.A. (252 So. 3d 287 [Fla. 1st DCA 2018])) sheds light on what might be the most misunderstood and misapplied legitimate business interest under Florida’s restrictive covenant statute (Section 542.335), i.e., the goodwill business interest. In Ansaarie, Florida’s First District Court of Appeals held that an employer has a legitimate business interest in its relationships with existing patients and ruled that for a non-compete clause to be enforceable, the party seeking enforcement, aka professional service providers, must plead and prove:

  • The existence of a legitimate business interest
  • That the contractually-specified restraints are reasonably necessary to protect the legitimate business interest.

Further, any non-compete agreement must be in writing to be enforceable.

How does this relate to drafting a non-compete agreement? If you’re able to prove the non-compete’s restraints are “reasonably necessary,” the burden of proof in any court action shifts to the person who’s opposing enforcement. They are the party that will need to prove to the court that the restraint is overbroad, overlong, or otherwise not reasonably necessary to protect your established legitimate business interests.

If the court concludes your non-compete clause is valid and enforceable and the former employee violated the non-compete agreement’s terms, a “presumption of irreparable injury” to your organization is created, and the court can enforce the non-compete through a temporary or permanent injunction.

Protecting Your Non-Compete Rights

For businesses, a non-compete agreement can be a significant source of value. If a non-compete is not drafted in accordance with Florida business law, a former employee has multiple options for working around it. For instance, they could move slightly outside the geographic border defined in the agreement and engage in the same business as yours. They might also try to exploit loopholes by arguing their new job doesn’t actually violate the non-compete’s terms or show the agreement is not related to legitimate business interests.

Non-compete agreements are complex areas of Florida law, and they must be carefully worded to ensure the state recognizes their validity. A business law attorney can help you draft effective and enforceable non-compete agreements or assist you when an employee violates a non-compete clause.

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