Restrictive Covenants in Florida: What are They and How are They Enforced
September 1, 2011
Generally speaking, restrictive covenants are clauses used by employers as part of their employment contracts, as a way to restrict certain activity by a prospective employee in order to protect legitimate business interests of the employer. Restrictive covenants can be used to prohibit a prospective employee from using confidential business information outside the scope of his or her new employment, or from soliciting the company’s clients if the new employee decides to leave the job. Restrictive covenants may take the form of a “covenant not to compete,” (“non compete,” for short), a “covenant not to solicit” (“non solicit,” for short), or a “confidentiality agreement.” Under the relevant statute, Florida section 542.335, the term “restrictive covenants” includes all contractual restrictions such as noncompetition/nonsolicitation agreements, confidentiality agreements, exclusive dealing agreements, and all other contractual restraints of trade.
Do Florida courts enforce these kinds of clauses or covenants? The answer will depend on the facts of the case, but for the most part, courts will enforce restrictive covenants if certain requirements are met.
First, it is important to note that if an employer believes that a restrictive covenant has been breached (or violated), the employer, and its attorney, should consider seeking injunctive relief. For those non-attorneys out there, injunctions are a legal device used to try to gain immediate relief by the court. Because it is difficult to prove what damages will result from a breach of a restrictive covenant, injunctive relief is the typical remedy for cases involving breaches of restrictive covenants. See Environmental Services, Inc. v. Carter, 9 So. 3d 1258, 1261 (Fla. 5th DCA 2009).
Before a court will issue an injunction, the moving party has to prove (1) the likelihood of irreparable harm, (2) the unavailability of an adequate remedy at law, (3) a substantial likelihood of success on the merits, and (4) that a temporary injunction will serve the public interest. See Environmental Services, Inc., 9 So. 3d at 1261. See also Hilb Rogal & Hobbs of Florida, Inc. v. Grimmel, 48 So. 3d 957, 959 (Fla. 4th DCA 2010). A violation of an enforceable restrictive covenant generally creates a presumption of irreparable injury. See Environmental Services, Inc., 9 So. 3d at 1261; Hilb Rogal & Hobbs of Florida, Inc., 48 So. 3d at 959.
Courts will determine whether to enforce a restrictive covenant in an employment contract by examining the requirements of Florida Statute section 542.335. See Environmental Services, Inc., 9 So. 3d at 1261; Hilb Rogal & Hobbs of Florida, Inc., 48 So. 3d at 959. The Fourth District Court of Appeal described the basic analysis as follows:
Section 542.335(1), Florida Statutes, permits enforcement of contracts that restrict or prohibit competition, but only “so long as such contracts are reasonable in time, area, and line of business . . . ” The statute also requires “that any restrictive covenant be set forth in a writing signed by the person against whom enforcement is sought, and that the restraint be shown to be reasonably necessary to protect a ‘legitimate business interests [sic]’ justifying the restriction.” A “legitimate business interest” includes “substantial relationships with specific prospective or existing customers . . . or clients.” . . . The party seeking enforcement of the non-compete agreement must present a prima facie case that the restrictions are reasonably necessary to protect its legitimate business interests . . . . The opposing party then has the burden of proving the contractual restraint is overbroad, overlong, or otherwise not reasonably necessary to support the restriction.
Hilb Rogal & Hobbs of Florida, Inc., 48 So. 3d at 959-960.
Attorneys litigating restrictive covenants and prospective employees presented with restrictive covenants in employment contracts may wish to take note of a few important considerations:
(1) Courts often recognize and enforce an employer’s legitimate interest in prohibiting solicitation of its customers with whom the employer has a substantial relationship. See Id. at 960-962 (collecting cases); Environmental Services, Inc., 9 So. 3d at 1264-1266; Atomic Tattoos, LLC v. Morgan, 45 So. 3d 63, 65 (Fla. 2d DCA 2010)
(2) Restrictive covenants should specifically define which customers or clients are not to be solicited by the prospective employee. See 4UOrtho, LLC v. Practice Partners, Inc., 18 So. 3d 41, 43 (Fla. 4th DCA 2009).
(3) Employers seeking to protect what it believes to constitute trade secret information will have to rely on more than mere statements of concern when the time comes to go to court. In one case, the court refused to enforce a restrictive covenant because testimony that an employer sought to protect “marketing plans, product plans, business strategies, financial information, forecasts, and the like” was found to be lacking in specificity. See Gould & Lamb, LLC, 949 So. 2d 1212, 1214 (Fla. 2d DCA 2007).
(4) Restrictive covenants which fail to contain a geographic scope are not automatically void. Rather, courts are permitted to determine what constitutes a reasonable geographic limitation. See Environmental Services, Inc., 9 So. 3d at 1264 (collecting cases).
(5) Pursuant to section 542.335(1)(d), restrictive covenants lasting 6 months or less are presumed reasonable, and any covenants lasting more than 2 years are presumed unreasonable. See Environmental Services, Inc., 9 So. 3d at 1263.
(6) Restrictive covenants may not be used to eliminate all competition, and may not be enforced where the court determines that the terms are unduly harsh or inflict an unnecessary result on the employee. See Edwards v. Harris, 964 So. 2d 196, 198 (Fla. 1st DCA 2007). Employers may not use restrictive covenants to prevent employees from going to work for a competitor “in any capacity.” See Edwards, 964 So. 2d at 198.
