ENFORCEMENT OF NONCOMPETE AGREEMENT: WHEN CAN COURTS CONSIDER INDIVIDUALIZED HARDSHIP?

Under Florida law, noncompete agreements signed after July 1996 are governed by Florida Statutes § 542.335. This statute is the basis for court decisions as to whether any non-competition contract can be enforced in the State of Florida. Over the years, court decisions have grappled with two related issues: (1) whether a non-compete agreement is “enforceable” and (2) whether and to what extent the non-competition agreement shall be “enforced.” On first impression, this distinction seems nitpicky and mere wordplay. However, in the arena of litigation over restrictive covenants and especially in the employment context, this distinction has been important in some cases. Peter Mavrick is a Fort Lauderdale non-compete lawyer who has successfully defended and prosecuted non-compete litigation for businesses and their owners.

This apparently twisted distinction between the enforceability of noncompetition contracts versus enforcement of an already enforceable restrictive covenant arises from a particular section of Florida’s noncompete statute, section 542.335(g)(1), which states that in determining the enforceability of a non-compete agreement a court “[s]hall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought.” Courts interpret this section in pari materia, i.e., in context, with another section of Florida’s restrictive covenant statute, section 542.335(1)(j). Once a covenant against competition is determined by a court to be “enforceable,” the statute sets forth certain rules for enforcement in § 542.335(1)(j) and states in pertinent part: “A court shall enforce a restrictive covenant by any appropriate and effective remedy, including but not limited to, temporary and permanent injunctions. The violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant.”

To determine the “appropriate and effective remedy” for enforcement of an enforceable restrictive covenant, courts maybe required, in certain circumstances, to consider individualized harm to the defendant in non-compete litigation. In Transunion Risk and Alternative Data Solutions, Inc. v. MacLachlan, 625 Fe.Appx. 403 (11th Cir. 2015), the United States Court of Appeals for the Eleventh Circuit overturned a federal District Judge’s decision to grant an injunction against a former employee in a non-compete case. The appellate court stated that “the district erred when it applied section 542.335(1)(g) in determining whether a preliminary injunction was an appropriate and effective remedy for the enforceable restrictive covenant [and] … failed to consider any harm that MacLachlan would suffer if the injunction was issued.” Transunion explained the rationale for its interpretation that § 542.335(1)(g) is directed to “enforceability,” and not “enforcement,” of the restrictive covenant:

This is evident from the framing, content, and position of the section in the overall structure of the statute. The section begins: “In determining the enforceability of a restrictive covenant, a court ….” It then goes on to list four considerations that a court “shall” or “shall not” contemplate when determining whether a restrictive covenant is enforceable. § 542.335(1)(g) 1-4. One of these—applied by the district court to the motion for preliminary injunction—is that the court “[s]hall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought.” § 542.335(1)(g)1. Section 542.335(g) 3 adds that the court “[s]hall consider all other pertinent legal and equitable defenses.” What is clear from the framing and content of sections 542.335(1)(g) 1-4 is that the mandated considerations therein are directed towards the determination of whether a restrictive covenant is enforceable. Accordingly, these sections should not be applied when determining the appropriate remedy. (Emphasis in the original.)

As the Supreme Court of Florida stated in White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 774 (Fla. 2017), Florida’s restrictive covenant statute “grants trial courts fairly wide distraction to fashion the appropriate context-dependent remedy.” That context can require that trial courts consider the harm caused to the defendant if an injunction were issued.

Peter Mavrick practices noncompete covenant litigation throughout South Florida, including Fort Lauderdale, Miami, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.