RECENT FLORIDA APPELLATE CASE HOLDS NON-COMPETE COVENANT NOT NECESSARILY INVALIDATED BY FAILURE TO PAY WAGES

The recent Third District Court of Appeal opinion in Reliance Wholesale, Inc. v. Godfrey, 2010 Fla.App.LEXIS 19459 at * 9 (Fla. 3rd DCA December 22, 2010), held that where a non-competition covenant is drafted as an “independent covenant,” as distinguished from a “dependent covenant,” a material breach defense premised on the employer’s alleged failure to pay wages is not a viable defense. This is an important case. A common defense to the enforceability of non-compete covenants is based on the employee’s contention that the employer failed to pay wages due; and on that basis, the employer committed a material breach of contract that invalidated the non-competition contract. See, for example, Cordis Corp. v. Prooslin, 482 So.2d 486, 490 (Fla. 3rd DCA 1986). However, the Reliance Wholesale case explained that Florida law limits the applicability of the material breach defense to “dependent covenants.” The defense is not applicable to “independent covenants.” The non-compete clause in Reliance Wholesale stated in pertinent part: “The covenants … shall be construed as agreements independent of any other provision in any other agreement … [and] the existence of any claim or cause of action of Employee against … [Employer], whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement of this Agreement.” Id. at *9. The Third DCA explained: “We therefore hold that, as a matter of law, Godfrey’s asserted defense–that she is excused from performance of the non-compete provision of the 2005 Agreement based on Reliance’s prior breach–is not a valid or ‘viable’ defense to the issuance of a temporary injunction in this case. Thus we hold that the trial court erred by concluding that Reliance failed to establish that it has a substantial likelihood of success on the merits.” Id. at *9-*10.

This is an important case for lawyers who draft non-compete contracts. Careful drafting can insulate a non-compete clause from attack when it matters most, i.e., when an employer needs to enforce a non-compete clause. The case is also important for litigators who need to overcome an employee’s assertion of material breach for failure to pay wages.

Attorney Peter Mavrick advises management regarding various problems they encounter with employees, including issues involving employee compensation, misconduct, performance problems, demotion, and termination. Mr. Mavrick also has successfully represented many employers when current or former employees threaten legal action. Mr. Mavrick regularly studies changes in federal and Florida labor and employment laws, including legal trends affecting the interests of management.