FLORIDA EMPLOYMENT AND NONCOMPETE LITIGATION: EMPLOYERS SHOULD CAREFULLY DRAFT SETTLEMENT AGREEMENTS TO AVOID FURTHER LITIGATION

Employers in litigation against their employees face the challenge of not only dealing with the claims made by those employees, but the threat of being left to pay the attorneys’ fees bill of their opponents. Employers can mitigate that risk, and sometimes even turn the tables and win their attorneys’ fees from their former employees, but it requires a prudent and careful approach. Peter Mavrick is a Miami employment lawyer and non-compete lawyer who has extensive experience in representing the interests of businesses and business owners.

Florida courts generally follow what is commonly known as the “American Rule,” which means that each party is responsible for its own, respective attorneys’ fees. There are, however, special exceptions to that rule in the employment law context. For example, federal law provides a one-sided fee shifting in favor of employees who prevail against their employers under the Fair Labor Standards Act in overtime, minimum wage, and in retaliation cases. In such cases, the employees “shall” be entitled to an award of their attorneys’ fees incurred in obtaining that recovery of the allegedly owed wages. 29 U.S.C. § 216(b). By contrast, in the context of non-compete agreements, Florida law is even-handed in allowing the winning side to recover legal expenses from the losing party. Florida’s non-compete statute allows the prevailing employer or employee to recover legal expenses incurred in securing victory. Florida’s noncompete statute, § 542.335(k), Florida Statutes, provides in pertinent part: “In the absence of a contractual provision authorizing an award of attorney’s fees and costs to the prevailing party, a court may award attorney’s fees and costs to the prevailing party in any action seeking enforcement of, or challenging the enforceability of, a restrictive covenant.” Since the use of the word “may” in the statute has been interpreted by Florida courts to be permissive but not mandatory, most companies include in their noncompete agreements provisions that state that attorneys’ fees shall be awarded to the prevailing party, to make the recovery mandatory for the prevailing party a requirement of the contract with the employee who signs the non-compete contract.

The issue of recovery of legal fees can become complicated in litigation when the parties each have a different basis to claim the right to recover attorneys’ fees from the opposing party. In McBride v. Legacy Components, LLC, the employee had FLSA claims which provide mandatory recovery of attorneys’ fees to a prevailing pursuant to federal law. Yet at the same time, the employer claimed that the employee had breached his noncompete agreement and therefore the employer was entitled to recover its own attorneys’ fees as the prevailing party under Florida law. 18-14105, 2019 WL 2538019 (11th Cir. June 20, 2019). The parties in McBride were ultimately able to come to a partial settlement agreement to resolve their disputes. The company would stop trying to enforce the noncompete and the employee would stop trying to collect his back wages and agreed to an injunction to prevent him from competing. The only thing left open was the entitlement to attorneys’ fees. The company, perhaps believing that the employee was not a prevailing party, agreed to leave the question of the employee’s entitlement to attorneys’ fees to be decided by the court. However, the company failed to preserve its legal right to recover its legal expense as the prevailing party in the noncompete lawsuit it filed. The employer could have preserved its legal claim for recovery of its legal expense as the prevailing party, but under the terms of its settlement agreement the employer agreed that only the employee could recover legal expenses.

The trial court magistrate found that the employee was not a prevailing party under the special circumstance, because the employee did not actually win anything from his FLSA claim and had an injunction entered against him. The trial court judge did not accept the magistrate’s findings because the company changed its position as it relates to the noncompete agreement, in part because of the settlement agreement. The federal trial Judge therefore decided that the employer was liable for the employee’s attorneys’ fees, in the amount of $46,375.

The Eleventh Circuit Court of Appeals agreed. The appellate determined that the employee was sufficiently a prevailing party on the FLSA claims in order to entitle an award of attorneys’ fees. The appellate court stated that a litigant can be a prevailing party even if the basis for that belief only comes from a settlement agreement and not a court award. Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598 (2001). The appellate court explained that it was not important that the employee actually receive money, but instead, the employee’s FLSA lawsuit caused an involuntary change in conduct on behalf of the company. This is in comparison to a situation like in Dionne v. Floormasters Enterprises, Inc., 667 F.3d 1199 (11th Cir. 2012) when an employer voluntarily sent an employee all of the overtime wages requested after receiving a lawsuit, and responded to the lawsuit by stating that the claims were now moot. In that case, the court found that the employee was not entitled to attorneys’ fees because the litigation ended with a dismissal.

The appellate court in McBride was simply upholding the factual finding of the trial court that the employee was the prevailing party. Had the trial court found instead that the company was the prevailing party under the same exact same situation, it is very possible that the appellate court would have upheld that decision as well.

Companies should consider how these attorneys’ fees statutes can interact at all phases of the litigation. The company in McBride likely did not consider that the employee would be able to recover all of his attorneys’ fees through his wage and hour claims, because the company appeared to have gotten what it always wanted, i.e., an injunction against the employee barring competition. The settlement agreement did not explicitly give the employee any recovery of attorneys’ fees. However, by settling everything but the employee’s attorneys’ fees award, the company exposed itself to extensive litigation and the eventual award against it. The better approach would be to draft the settlement agreement to end the litigation entirely, or if further litigation could not be avoided, to at least preserve the employer’s right to recover its attorneys’ fees as well. Had the company maintained its claim to attorneys’ fees, it would have been able to go on the offensive and either recover its own attorneys’ fees or provide the court with justification to reduce or eliminate the eventual award of any attorneys’ fees to the employee.

Peter Mavrick is a Miami employment attorney and non-compete attorney defending businesses and their owners. This article does not serve as a substitute for legal advice tailored to a particular situation.