FORT LAUDERDALE NON-COMPETE AGREEMENTS: ALLEGATIONS OF ILLEGAL CONDUCT AND RESTRICTIVE COVENANTS (PART II)

This article is the second of a two-part series concerning the enforcement of noncompete agreements when the former employee claims that his former employer engaged in illegal conduct. Part I explored the enforceability of contracts which contain illegal terms. This, Part II, addresses how allegations of illegal conduct can affect noncompete agreements particularly. As shown below, illegal conduct does not negate the enforcement of a noncompete agreement when unless the “legitimate business interest” supporting the noncompete agreement was illegal or there was a sufficient public policy reason to not enforce the noncompete agreement. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

Noncompete agreements are contracts and are affected by all of the general principles of contract law. However, noncompete agreements are a unique type of contract which has special provisions governing it. Generally, noncompete agreements are unlawful unless they comply with the requirements listed in § 542.335, Florida Statutes. Particularly, a “person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.” § 542.335(b), Florida Statutes. The statute specifically describes that “trade secrets,” “valuable confidential business […] information,” “substantial relationships with specific prospective or existing customers,” “customer […] goodwill” associated with the sale of a business or a particular geographical or market area,” and “extraordinary or specialized training.” § 542.335 (1)-(5), Florida Statutes. While the vast majority of cases involve these particular categories of “legitimate business interests,” courts will consider other types of legitimate business interests which are not listed. White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC, 226 So.3d 774 (Fla. 2017) (holding that referral sources may be legitimate business interests even though they are not listed in § 542.335).

The phrase “legitimate business interest” may sound as if the business seeking to enforce the noncompete agreement must be a “legitimate business.” This is not the way that the statute is worded nor how cases interpret it. Instead, the concern is whether there is a legitimate business interest in enforcement of the noncompete, specifically. § 542.335(c), Florida Statutes (“A person seeking enforcement of a restrictive covenant also shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction”).

The business’ compliance with the law in its operations would not normally be a factor that is relevant in evaluating whether there is a “legitimate business interest” unless that business interest is itself unlawful. There are some business interests which are not legitimate, and therefore, cannot justify the enforcement of a noncompete. For example, simply desiring to prevent competition does not qualify as a legitimate business interest. White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 774 (Fla. 2017) (“Section 542.335 does not protect covenants whose sole purpose is to prevent competition per se because those contracts are void against public policy”). Presumptively, an illegal business interest would not be a legitimate business interest. As hypothetical examples, preservation of confidential knowledge concerning an illegal explosive or a list of customers who were victims of a Ponzi scheme would probably not qualify as “legitimate business interests.”

Section 542.335(g)(4), Florida Statutes, requires courts to consider “the effect of enforcement upon the public health, safety, and welfare.” Accordingly, a court may refuse to enforce a noncompete agreement if the Court finds that it is contrary to Florida’s public policy. Harris v. Gonzalez, 789 So. 2d 405 (Fla. 4th DCA 2001) (defining “public policy” as the matters that affect “public morals, public health, public safety, public welfare, and the like,” which are the same factors listed in § 542.335(g)(4)).

Former employees will often try to claim that a noncompete agreement should not be enforced for public policy reasons, such as allegations of their former employer’s illegal conduct. This is a heavy burden. Section 542.335(i), Florida Statutes, specifically requires that court identify the “specified public policy” at issue and find that it “substantially outweigh[s] the need to protect the legitimate business interest or interests established by the person seeking enforcement of the restraint.” Florida’s public policy in enforcing noncompete agreements is the strongest in the nation. “Public policy in Florida favors enforcement of reasonable covenants not to compete.” Quirch Foods LLC v. Broce, 2020 IER Cases 395224 (Fla. 3d DCA 2020). Appellate courts will routinely reverse trial courts which refuse to enforce noncompete agreements without identifying specific public policy interests that outweighs the interest in enforcing noncompete agreements. TransUnion Risk & Alternative Data Sols., Inc. v. Reilly, 181 So. 3d 548 (Fla. 4th DCA 2015); Telemundo Media, LLC v. Mintz, 194 So. 3d 434 (Fla. 3d DCA 2016) (“Nor does an injunction disserve the public interest where, as here, there are contractual rights at issue and ‘the public has a cognizable interest in the protection and enforcement of contractual rights’”).

In Avalon Legal Info. Services, Inc. v. Keating, 110 So. 3d 75 (Fla. 5th DCA 2013), the court affirmed the trial court’s holding in a noncompete case where the former employee claimed that enforcing the agreement would violate ethical rules. In Avalon, the plaintiff was seeking to enforce a noncompete agreement against a paralegal. The paralegal asserted that the agreement violated several rules of the Florida Rules of Professional Conduct. Avalon expressly held that the potential ethical violation in enforcing the agreement should be addressed by the Florida Bar, rather than the court enforcing the noncompete. Avalon Legal Info. Services, Inc. v. Keating, 110 So. 3d 75 (Fla. 5th DCA 2013) (“We agree with the trial court that the alleged rule violations are best left for The Florida Bar to resolve”). Avalon’s refusal to even consider the arguments concerning violations of ethical rules illustrates how difficult it is for former employees to prevail on the argument that a former employer’s illegal conduct justifies the refusal to enforce noncompete agreements.

Former employees defending against a claim of a violation of a non-compete will often make various claims of unlawful conduct to avoid imposition of an injunction against them. While § 542.335, Florida Statutes, allows former employees to make such allegations, they are rarely granted. Peter Mavrick is a Fort Lauderdale non-compete lawyer who also practices in Palm Beach, Boca Raton, and Miami-Dade. This article does not serve as a substitute for legal advice tailored to a particular situation.