FORT LAUDERDALE BUSINESS LITIGATION: RESTRICTIVE COVENANT DURATIONS

            Businesses often rely on restrictive covenants to protect their sensitive business information and to protect themselves from unfair competition. Businesses often require employees to sign non-compete agreements and employee confidentiality agreements to accomplish these goals. Businesses also often include similar provisions when they purchase all or part of another business. A purchaser will include restrictive covenant provisions to prevent the seller from starting a new business that competes against the business purchased by the buyer. Florida law permits parties to enter into restrictive covenants like the ones just discussed if the covenant is supported by a legitimate business interest and is reasonable in time, duration, and line of business. Fla. Stat. § 542.335. Therefore, a business must make sure its restrictive covenants are reasonable in duration. The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

            Florida Statute § 541.335 governs restrictive covenants in Florida and provides presumptions regarding the length of time that constitute a reasonable duration. The reasonableness of a duration depends on the purpose of the particular restrictive covenant. According to the statute, restrictive covenants involving a former employee, agent, or independent contractor that are not based on the protection of trade secrets and do not involve the sale of a business are presumed reasonable if the restriction is six months or less. Restrictions of more than two years are presumed unreasonable for that same class of persons. The time period begins when the employment relationship or independent contractor relationship terminates.

            The statute permits longer restrictive covenant durations under certain circumstances. One such circumstance involves the seller of a business. A “court shall presume reasonable in time any restraint three years or less in duration and shall presume unreasonable in time any restraint more than seven years in duration.” Fla. Stat.§ 542.335. Another example is a distributors relationship and franchisor relationship. One year or less is presumed reasonable for restrictive covenants involving these relationships, but more than three years is presumed unreasonable. Finally, restrictive covenants intended to protective trade secrets have the longest permissible duration. Courts will presume a restrictive covenant period of five years or less to be reasonable and more than ten years to be unreasonable.

            What if a business wants a restrictive covenant longer than the durations set out in the statute? Courts in Florida normally enforce only the duration established by the statute. However, the durations identified in the restrictive covenant statue are rebuttable presumptions.  Consequently, a plaintiff seeking to enforce a restrictive covenant for more than the maximum duration considered reasonable under the statute, could supply a court with evidence demonstrating special circumstances warrant a longer enforcement duration. However, it is generally difficult to establish the necessity of a longer duration. Flickenger v. R.J. Fitzgerald & Co., Inc., 732 So. 2d 33 (Fla. 2d DCA 1999) (rejecting three-year employee non-compete period as exceeding the two-year duration permitted by statute and stating employer did not present evidence supporting the need for the longer period).

            In rare cases, the statutory durational presumptions can be exceeded. In Avalon Legal Information Services, Inc. v. Keating, 110 So. 3d 75 (Fla. 5th DCA 2013), the court found that a non-compete agreement between an independent contractor and a business with a three-year non-compete period was reasonable. Although the three-year period exceeded the two-year presumption, the business had client contracts expiring more than two years after the standard two non-compete period would expire. Therefore, the court found enforcement of a three-year non-compete ban was reasonable under the circumstances because the independent contractor would not be able to compete with the business until the year after the business’ client contracts expired.

            In sum, Florida Statute § 542.335 establishes rebuttable presumptions regarding the durations of restrictive covenants. But in certain limited circumstances, the durations can be longer than what the statute presume valid.

The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.