FLORIDA NON-COMPETE AGREEMENT LAW VERSUS NEW YORK LAW: PROTECTION OF CUSTOMER RELATIONSHIPS AND GOODWILL

Florida and New York’s non-compete laws are protective of business interests in customer relationships and goodwill. Due to the mobility of workers as well as the frequent overbreadth of non-compete covenants in today’s economy, there are often cases when the non-compete laws of more than one state may be implicated In the context of employment law, the Florida law and New York law differ differ in their concern for the burdens created by non-compete agreements on employees. Florida courts have found that businesses have a legitimate business interest in protecting customer relationships and goodwill from competition by former employees who gained substantial knowledge of its customers, their purchasing history, needs and preferences. Conversely, New York courts have held that the enforcement of a non-compete clause based merely upon the employee’s knowledge of the former employer’s customers is generally not protectable. Peter Mavrick is a Fort Lauderdale non-compete lawyer who has substantial experience with agreements restricting employment, solicitation, and other forms of competition.

Both states’ laws have a similar standard for evaluating the necessity of the protection intended for non-compete agreements. Under Florida law, the validity of non-compete clauses under Florida Statute 542.335 requires: “the employer to plead and prove (1) the existence of one or more legitimate business interests justifying the restrictive covenant and (2) that the contractually specified restraint is reasonably necessary to protect the established interests of the employer.” North American Products Corp. v. Moore, 196 F.Supp.2d 1217 (M.D. Fla. 2002) (emphasis added). Florida law allows a non-compete clause to be enforced as long as it is “reasonably necessary” to protect the established interests of the employer.

Under New York law, a non-compete agreement “will only be subject to specific enforcement to the extent that it is reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.” BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999). The common law rule adopted by New York law holds that “[a] restraint is reasonable only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public.” BDO Seidman v. Hirshberg, 93 N.Y.2d at 392–93 (emphasis added).

Both states have found that substantial customer relationships and goodwill are protectable business interests. Examples of their differences in the degree of their protection was demonstrated in the following cases. Our previous article on Florida non-compete law discussed the case of North American Products Corp. v. Moore, where a federal court entered a preliminary injunction against a former employee to enforce a non-compete agreement. The federal court found that because Moore gained substantial knowledge of NAPCO’s customers, their purchasing history, needs and preferences during his employment with NAPCO, that NAPCO had a legitimate business interest in protecting its customer relationships and goodwill.

New York courts have found that an employee’s knowledge of customers is generally not a protectable interest. “[I]t is well established that ‘an employee’s recollection of information pertaining to specific needs and business habits of particular customers is not confidential.’” Johnson Controls, Inc. v. A.P.T. Critical Sys., Inc., 323 F. Supp. 2d 525 (S.D.N.Y. 2004). “Where the knowledge does not qualify for protection as a trade secret and there has been no conspiracy or breach of trust resulting in commercial piracy we see no reason to inhibit the employee’s ability to realize his potential both professionally and financially by availing himself of opportunity.” Reed, Roberts Associates, Inc. v. Strauman, 40 N.Y.2d 303 (1976).

However, an employee’s knowledge of customer proposals is a protectable interest under New York law. Information such as the amount customers are willing to pay, which would aid the former employer in setting prices and which could only be acquired through personal solicitation, is confidential. Such information would be protectable because the only way the former employee could have gained access to the information necessary to submit competitive proposals would be through his or her employment with the former employer. Inflight Newspapers, Inc. v. Magazines In-Flight, LLC, 990 F. Supp. 119 (E.D.N.Y. 1997) Inflight Newspapers, Inc. v. Magazines In-Flight, LLC held that “an employee’s use of an employer’s trade secrets or confidential customer information can be enjoined even in the absence of a restrictive covenant when such conduct violates a fiduciary duty owed by the former employee to his former employer.”

Peter Mavrick is a Fort Lauderdale non-compete attorney. This article does not serve as a substitute for legal advice tailored to a particular situation.