FORT LAUDERDALE NON-COMPETE AGREEMENTS: FLORIDA LAW VERSUS MARYLAND LAW

Florida and Maryland’s non-compete laws are protective of business interests in customer relationships and goodwill. Due to the advent of remote working capabilities, there are often cases when the non-compete laws of more than one state may be implicated. For example, a Florida employee may work in Florida for a company based in Maryland, and sign a non-compete agreement that contains an explicit provision requiring that Maryland law controls any disputes between employer and employee. In the context of employment law, the Florida law and Maryland law differ in contract interpretation and the burdens created by non-compete agreements on employees. Florida courts have found that a non-compete clause, itself, must be reasonably necessary to protect the established interests of the business. These subtle differences can impact the determination by the courts. Maryland courts have held that the enforcement of a non-compete clause must show, among other things, that the agreement is “no wider in scope and duration than is reasonably necessary to protect the employer’s interests.” CytImmune Scis., Inc. v. Paciotti, 2016 WL 3218726 (D. Md. June, June 10, 2016). Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Miami, Boca Raton, and Palm Beach, Florida.

Florida courts tend to limit their review to the wording of non-compete contracts for indications of the parties’ intent. “In construing contracts, the court’s concern is to determine the intention of the parties from the language used, objects to be accomplished, other provisions in the Contract which might shed light upon the question, and circumstances under which it was entered into.” Bal Harbour Shops, Inc. v. Greenleaf & Crosby Co., Inc., 274 So. 2d 13 (Fla. 3rd DCA 1973). Generally, parol evidence (evidence of prior or contemporaneous negotiations and agreements that contradict, modify, or vary the contractual terms of a written contract) is admissible only to clarify ambiguous terms of contract in order to ascertain the parties’ intent. O’Neill v. Scher, 997 So. 2d 1205 (Fla. 3d DCA 2008) (Court could not indulge in modification of the unambiguous express terms).

Maryland courts use the “objective theory of contract interpretation” to determine “from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated.” Dennis v. Fire & Police Emp’rs’ Ret. Sys., 390 A.2d 737 (Md. 2006). Dennis held that the test is not what the parties to the contract intended it to mean, but what a reasonable person in the parties’ position would have thought it to mean. In the case of Highland Consulting Group, Inc. v. Soule, 2020 WL 1272516 (S.D. Fla. March 17, 2020), the district court, applying Maryland law, addressed whether the defendant complied with the contractual requirement to return the company’s property upon termination of employment. The former employee returned the property to the company only in response to a discovery request in the lawsuit. Soule held that no reasonable person could have interpreted the phrase “[u]pon termination of employment,” to be satisfied only after a lawsuit was filed and only in response to a discovery request. Soule considered this unambiguous phrase in by what a reasonable person in the parties’ shoes would have thought this phrase in the contract to mean. This standard is more arbitrary than the Florida standard, because it can encompass the subjective viewpoint of the trier of fact.

Florida and Maryland have different legal standards to evaluate the scope of 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 Maryland law, an employer seeking to enforce a non-compete agreement must show that all of the following four conditions are met: “(1) the employer must have a legally protected interest; (2) the restrictive covenant must be no wider in scope and duration than is reasonably necessary to protect the employer’s interest; (3) the covenant cannot impose an undue hardship on the employee; and (4) the covenant cannot violate public policy.” CytImmune Scis., Inc. v. Paciotti, 2016 WL 3218726 (D. Md. June 10, 2016).

Both states have a reasonableness standard. However, Maryland law examines reasonableness in terms of a maximum limitation of the scope, i.e. “no wider in scope and duration than is reasonably necessary.” By contrast, Florida law does not apply the reasonableness test in terms of the scope, but rather whether the non-compete as a whole is reasonably necessary to protect a company’s legitimate business interests. After the company establishes its prima facie case that the non-compete is reasonably necessary, then the person opposing enforcement has the burden of establishing that the non-compete is “overbroad, overlong or otherwise not reasonably necessary,” to protect a company’s legitimate business interests. Section 542.335, Florida Statutes.

Peter Mavrick is a Fort Lauderdale non-compete lawyer who also practices non-compete litigation in Palm Beach, Boca Raton, and Miami. This article does not serve as a substitute for legal advice tailored to a particular situation.