Non-Compete Agreements and Other Restrictive Covenants
By: Mark A. Levy
The use by employers of restrictive covenants such as non-compete agreements and non-solicitation agreements has been steadily growing in popularity. Unfortunately, in many cases it seems that the drafters of these provisions attempt to make the restrictive covenant as lengthy and as broad as possible. However, just because an activity may be covered by such an agreement, there is no guarantee that the provision will be enforced.
In a recent case, Florida’s Fifth District Court of Appeal ruled that the plaintiff had failed to prove that enforcement of the restrictive covenant was necessary to protect the plaintiff’s legitimate business interests. Evans v. Generic Sol. Eng’g, LLC, No. 5D15-578, 2015 WL 6554429, at *1-2 (Fla. 5th DCA 2015). At issue in Evans was the right to do business with Robbins Research International (“Robbins”), a company controlled by famed motivational speaker Tony Robbins. In Evans, the employment agreement expressly prohibited the former employee (Andrew Chinn, an independent contractor) from working directly or indirectly with current or former customers of the company, Tech Guys Who Get Marketing (“Tech Guys”). The Evans court, however, took issue with the idea that preventing Chinn from doing work for a former customer of Tech Guys furthered a legitimate business interest.
The Florida statute governing restrictive covenants, Section 542.335, permits enforcement of contracts that restrict or prohibit competition, but only so long as the contract is reasonable in time, area, and line of business. The restrictive covenant must be set forth in writing, and signed by the person against whom enforcement is sought. Also, the party seeking enforcement of the non-compete agreement must demonstrate that the restrictions are reasonably necessary to protect its legitimate business interests. Legitimate business interests include substantial relationships with specific prospective or existing customers or clients. Clearly, the right to prohibit the direct solicitation of existing customers protects a legitimate business interest. However, the protection of former customers generally does not qualify as a legitimate business interest where there is no identifiable agreement that the customer would return with future work. Additionally, the Evans court stated that protection of an employer from ordinary competition is not a legitimate business interest, and a covenant designed solely for that purpose will not be enforced. The Evans court recognized that just because a party violated a broadly worded restrictive covenant does not mean the court should grant relief, because under Florida law and public policy, the enforcing party must prove that enforcement is necessary to protect its legitimate business interests. Because Tech Guys never had an exclusive contract with Robbins, had no reasonable expectation that it would continue to provide services to Robbins, and could have continued working with Robbins had it chosen to do so, the Court refused to enforce the restrictive covenant.
The lesson to be learned is that simply drafting a broad restrictive covenant may not achieve an employer’s goals. Restrictive covenants should be carefully drafted to ensure that they are limited to protecting legitimate business interests. And, a party defending the enforcement of such a provision should make sure that the covenant goes no further than is permitted under Florida law.
As a Partner with Brinkley Morgan’s Business Litigation and Appellate group in Ft. Lauderdale, Mark A. Levy represents a wide range of clients, including companies, individuals and local governments, assisting them with avoiding and resolving all types of business, commercial and financial disputes. His practice focuses primarily on commercial litigation, including creditors’ rights, bankruptcy, business torts, corporate disputes, contract disputes, real property disputes, employment and non-compete agreements, intellectual property, and local government issues. He can be reached by telephone at 954.522.2200 or by email at Mark.Levy@brinkleymorgan.com