FORT LAUDERDALE BUSINESS LITIGATION: ACCESS TO A FORMER EMPLOYER’S CONFIDENTIAL INFORMATION MAY NOT CONSTITUTE AN AUTOMATIC BREACH OF A RESTRICTIVE COVENANT

Florida’s statute governing restrictive covenants requires the party trying to enforce the restrictive covenant to plead and prove the existence of at least one legitimate business interest justifying enforcement of that covenant. Fla. Stat. 542.355 (“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.”). Common restrictive covenants include the protection of trade secrets and valuable confidential business information that does not otherwise qualify as trade secret. In some cases, employees possessing an employer’s trade secrets or valuable confidential business information leave their employers to join competitors. Those employees carry with them the trade secrets and valuable confidential business information learned while working for their employer. Sometimes employees maliciously and initially take the information by stealing company records. But other times, the information is taken unintentionally merely because the information is lodged in the employees’ brain. Employees cannot disassociate from information already lodged in their brain for obvious reasons. This presents a conundrum. Can employees that had access to the former employer’s information work for a competitor if the employees (1) entered a restrictive covenant agreement with their former employer and (2) do not use the information at their new employer? The answer is; maybe. 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.

The issue outlined above commonly arises when a former employer asserts a breach of contract action against a former employee for breaking a confidentiality covenant. The employee usually defends the action by claiming he or she never used the employee’s information even though he or she had access to that information when he or she was an employee. This is what happened in Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223 (11th Cir. 2009) (The defendant’s “only argument related to Proudfoot’s confidential information is that he did not intentionally breach the confidentiality clauses’s restriction against the retention of Proudfoot materials because he… never used or disclosed those materials while working at Highland.”). The court rejected the former employee’s argument because the former employee’s “employment with Highland endangered the information that he received at Proudfoot [(the former employer)].” The court determined that this fact alone provided a basis to enforce the restrictive covenant against the former employee. Therefore, some courts will enforce restrictive covenants when an employee is in a position at his new employer to use information acquired from the former employer to unfairly compete against the former employer. See Open Magnetic Imaging, Inc. v. Nieves–Garcia, 826 So.2d 415 (Fla. 3d 2002).

Proudfoot does not provide the only solution on the subject. “A law review article co-authored by the Senate sponsor of Fla. Stat. § 542.335 implies that a second standard should govern.” See John A. Grant & Thomas Steele, Restrictive Covenants: Florida Returns to the Original “Unfair Competition” Approach to the 21st Century, 70 Fla. B.J. 53, 53–56 (Nov. 1996). The author suggests that courts look to the definition of threatened trade secret misappropriation, which would only allow enforcement of restrictive covenants when disclosure of the information is inevitable. See PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir.1995) (enjoining employee from working for competitor based on inevitable disclosure of trade secrets even though employee did not enter into non-compete agreement).

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.