RECENT FLORIDA CASE REVERSES TRIAL JUDGE REGARDING “INDEPENDENT” NON-COMPETITION COVENANT

Under Florida law, non-competition covenants are generally enforceable if they protect one or more legitimate business interest. However, certain acts by the employer could defeat the enforceability of the non-competition covenant. Under contract law, a party’s material breach of a contract will render the entire contract unenforceable against the other party. In other words, if an employer materially breaches the employment contract—i.e., if the employer fails to pay wages or commissions in accordance with the employment contract—the employee will be released from the non-competition covenant. There is an exception to that general rule: independent non-competition covenants.

If the non-competition provision of an employment contract is considered “independent,” then the employer’s breach of the employment contract will not affect the non-competition covenant’s enforceability. Essentially, the independent non-competition covenant will be considered a separate contract. A Florida district court recently shed some light on what contractual language would suffice to render a non-competition covenant “independent.”

In Richland Towers v. Denton, 2014 Fla. App. LEXIS 3472 (Fla. 2d DCA Mar. 12, 2014), an employer, Richland Towers, sued to enforce its non-competition covenants with two former employees who started a competing business. Richland Towers, however, failed to pay those employees certain bonuses that were required under the employment contract. The trial court found that Richland Towers’ failure to pay the contractually required bonuses constituted a prior material breach that essentially destroyed the entire employment contract and released the employees from the non-competition covenant. The appellate court disagreed.

The appellate court held that the following two provision in the employment contracts rendered the non-competition covenants “independent”: (1) “Each restrictive covenant … shall be construed as a covenant independent of any other covenant”; and (2) “the existence of any claim or cause of action by the Employee against the Corporation … shall not constitute a defense to the enforcement by the Corporation of any other covenant.” According to the appellate court, those two provisions made the non-competition covenants “independent.”

Every case is different, and a court’s construction of contractual terms depends on many factors. However, as the court in Richland Towers found, if an employment contract contains express provisions that (1) the non-competition covenant is independent of other provisions and that (2) an employee’s claims against the employer will not constitute a defense to the enforcement of the non-competition covenant, then the non-competition covenant will likely be considered “independent.”

Peter T. Mavrick represents clients in non compete agreement cases in Fort Lauderdale, Palm Beach, and Miami Dade. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311; Email: peter@mavricklaw.com.