Florida Business Litigation Lawyer Blog
Agreements in restraints of trade are generally void unless they comply with the procedures of § 542.335, Florida Statutes. The statute requires that any agreement restraining trade, such as a non-compete or non-solicitation agreement, be supported by a “legitimate business interest.” An agreement restraining trade can only be enforced to the extent that the agreement protects this legitimate business interest. It is therefore critical that litigants be familiar with what qualifies as a “legitimate business interest.” The Florida Supreme Court has established that referral sources can qualify as something that can be a protectible legitimate business interest. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has extensive experience with non-compete litigation.
Florida’s non-compete laws are very pro-employer in comparison to most of the United States. Norman D. Bishara, Fifty Ways to Leave Your Employer: Relative Enforcement of Covenants Not to Compete, Trends, and Implications for Employee Mobility Policy, 13 U. Pa. J. Bus. L.751 (Spring 2011). Nevertheless, Florida courts will not enforce a non-compete agreement unless it strictly complies with the requirements of Florida statutes.
Under Florida law, generally, “[e]very contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful.” Fla. Stat. § 542.18. The exception is found in the express statutory authority found in § 542.335, Florida Statutes. In pertinent part, § 542.335, Florida Statutes provides:
(1) Notwithstanding [§] 542.18 and subsection (2), enforcement of contracts that restrict or prohibit competition during or after the term of restrictive covenants, so long as such contracts are reasonable in time, area, and line of business, is not prohibited. In any action concerning enforcement of a restrictive covenant:
[…]
(b) The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant. The term “legitimate business interest” includes, but is not limited to:
- Trade secrets, as defined in s. 688.002(4).
- Valuable confidential business or professional information that otherwise does not qualify as trade secrets.
- Substantial relationships with specific prospective or existing customers, patients, or clients.
- Customer, patient, or client goodwill associated with:
- An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress”;
- A specific geographic location; or
- A specific marketing or trade area.
- Extraordinary or specialized training.
Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.
Critically, any non-compete agreement that an employer seeks to enforce must be supported by a legitimate business interest. What qualifies as a legitimate business interest for one company might not qualify as a legitimate business interest for another company. For example, a company that provides its employees with months of technical training on how to operate heavy machinery may have a legitimate business interest in preventing that employee from using that extraordinary or specialized training against the employee immediately after leaving the company. By contrast, a retail sandwich shop that provides a day of training probably does not have a legitimate business interest in “extraordinary or specialized training” to prevent a sandwich-maker employee from competing. The exact same non-compete agreement would probably be enforceable in the first example but not the second.
Before 2017, Florida courts tended to enforce non-compete agreements only if they were supported by the specific business interests listed in § 542.335(1)(b)(1)-(5), Florida Statutes, namely: the protection of trade secrets or confidential information, substantial relationships with customers or prospective customers, customer goodwill, or extraordinary or specialized training. That changed in 2017 with a new interpretation of the statute in the Florida Supreme Court case, White v. Mederi Caretenders Visiting Services of Se. Florida, LLC, 226 So. 3d 774 (Fla. 2017).
In White, a home healthcare services company sued its former employee for competing against it by soliciting physicians to be referral sources for a competing company. A major part of the former employee’s job was to solicit physicians and medical facilities for referrals. Because relationships with current customers are explicitly protected by the statute but referral sources are not explicitly articulated as a “legitimate business interest” under the statute, the former employee claimed that the non-compete agreement she had with her former employer could not be enforced. The Florida Supreme Court disagreed. The Supreme Court determined that referral sources can be a legitimate business interest to support the enforcement of a non-compete even though such a legitimate business interest is not specifically identified in the wording of the non-compete statute.
White held that the list found in § 542.335(1)(b)(1)-(5), Florida Statutes, was not exclusive and so referral sources could also be a legitimate business interest even though it is not listed in the statute. “[T]he illustrative list guides courts in their interpretation of what types of non-enumerated business interests qualify as legitimate under section 542.335. However, because the statute protects more business interests than those specifically listed, courts must necessarily engage in fact—and industry-specific determinations when construing non-enumerated interests.” Id.
The Florida Supreme Court in White found that whether something is a legitimate business interest is dependent on the facts of a given situation and the relevant industry. White explained in pertinent part:
Incidentally, although the exact boundaries of section 542.335(1)(b) are not drafted with precision, the scope of unprotected business interests is well established. Section 542.335 does not protect covenants “whose sole purpose is to prevent competition per se” because those contracts are void against public policy. For an employer to be entitled to protection, “there must be special facts present over and above ordinary competition” such that, absent a non-competition agreement, “the employee would gain an unfair advantage in future competition with the employer.” Additionally, section 542.335 is set against the backdrop that contracts in restraint of trade are generally unlawful. Thus, section 542.335 is a carve out of the general prohibition, striking a delicate balance between legitimate business interests and a person’s inalienable right to work [citations omitted, emphasis in original].
Florida law permits employers to enforce restrictive covenants against their former employees when those covenants protect an employer’s legitimate business interests. Employers should ensure that their non-compete and non-solicitation agreements are designed to protect the particular industry and business that they are in.
Peter Mavrick is a Miami non-compete lawyer and business litigation lawyer. This article does not serve as a substitute for legal advice tailored to a particular situation.