Florida is perhaps the most aggressively pro-non-compete state in the entire country. That’s right. I am aware that many people linger under the delusion that non-compete agreements “just don’t hold up”, but that could not be further from the truth. The reality is this: Florida courts routinely and aggressively enforce non-compete agreements through temporary restraining orders and preliminary injunctions. In spite of this, sometimes it is possible to fight a non-compete agreement and win. From my experience litigating Florida non-compete cases at every level (state court, federal court and appellate courts), I find that the following Florida non-compete defenses and defense strategies can be useful:
(1) Prior Breach – When the defense of prior breach is available, it is often very effective. Essentially, the prior breach defense works like this: Joe Smith has a an employment agreement with ABC Co. This agreement contains various provisions, including a non-compete clause. Joe Smith leaves the company and starts XYZ Co., doing the same line of business. ABC Co. alleges that Joe Smith breached the non-compete provision. BUT Joe Smith counters that ABC Co. breached the agreement first by breaching some other material provision of the agreement. Usually, this relates to compensation. Let’s say ABC Co. was obligated to pay Joe Smith annual bonuses equivalent to 5% of ABC Co.’s net earnings. He has credible information that the bonuses ABC Co. paid him were only 1% of its net earnings instead of the agreed-upon 5%. This could constitute a prior breach. If it’s a prior breach, that breach could potentially release Joe Smith from any other contractual obligations (including the non-compete provision). That said, over the past several years, Florida court’s have eroded the prior breach defense through some logically incoherent decisions about “independent covenants.” Bottom line: If there has been a prior breach, have an experienced attorney review your employment agreement and determine whether or not the prior breach defense is viable.
(2) Temporal / Geographic Scope: Again, there are common (and very dangerous) misperceptions about Florida non-compete agreements and temporal or geographic scope. Many people assume that a non-compete agreement is unenforceable if it lacks a time or geographic limitation, or, if it contains limits that are incredibly broad. Under Florida law, where a non-compete agreement either (1) lacks such limits or (2) contains limits that are too broad, Florida courts are required to revise (or “blue pencil”) the terms. As such, the fact that an agreement is overbroad in geography or time is not – by itself – a Florida non-compete defense. Nonetheless, there are certain defenses related to geography and time. For instance:
- If a plaintiff alleges a non-compete breach but the conduct at issue took place outside of the restricted territory, this is a basic and very strong defense.
- If a non-compete agreement contains a lengthy term, that term may not be enforced. For instance, in an employee non-compete agreement, if the term is 10 years, most courts – even in Florida – simply would not uphold such a lengthy restriction. So, if 3 or 4 years have already elapsed, it may be possible to the non-compete restriction is no longer valid or enforceable.
- If a non-compete restriction bars an individual from working in a broad geographic territory, that restriction may only be enforced to prohibit the individual from working or competing in the same territory where he worked previously. So, for instance: John Smith is a sales executive assigned to sell in Florida, but his non-compete is nationwide. There is a good argument (backed by Florida case law) that the restricted territory should be narrowed to Florida – the state in which he sold. As such, John Smith could be free to sell in the rest of the company.
(3) Merits – No Legitimate Interest: This is the most technically complex Florida non-compete defense and involves attacking the non-compete by establishing that the non-compete is not necessary to protect any legitimate business interest. Under Florida law, legitimate business interests generally take the form of confidential information, customer relationships, business goodwill or an extraordinary investment in the employee. As such, attacking the claim of a legitimate business interest means establishing the absence of truly confidential information, the lack of substantial customer relationships, etc.
Bottom line: Although Florida is a pro-non-compete state and although Florida courts routinely and aggressively enforce non-compete agreements, there are a number of Florida non-compete defenses. These defenses involve complicated legal and factual issues. Anyone facing the prospect of a non-compete dispute should seek representation from an attorney or firm that has extensive experience litigating non-compete disputes.
Jonathan Pollard is a competition lawyer based in Fort Lauderdale, Florida. His office can be reached at 954-332-2380.