NON-COMPETE LITIGATION: AN EMPLOYER’S VIOLATION OF THE FLSA COULD PREVENT ENFORCEMENT OF A RESTRICTIVE COVENANT CONTAINED IN AN EMPLOYMENT AGREEMENT

The Mavrick Law Firm regularly represents entrepreneurs who open businesses in industries in which they were formerly employed. As such, we are frequently confronted with covenants not to compete signed by the entrepreneurs when they were previously employed. The covenants not to compete, also known as restrictive covenants, typically purport to restrict the entrepreneurs from competing against their former employers for certain time periods and within a specific geographic areas. Peter Mavrick is a Miami non-compete attorney who has an excellent track record in successfully defending entrepreneurs against non-compete covenant lawsuits. In some of these cases, the entrepreneur/former employee have successfully counterclaimed based on violations of the Fair Labor Standards Act (“FLSA”) because of the former employer’s failure to pay legally required overtime or minimum wages. What the entrepreneur may not know is that not only may he or she be able to recover any wages that were not paid under the FLSA, he or she may also prevent the enforcement of a restrictive covenant by the employer.

The idea that a violation of the FLSA can prevent against a former employer’s enforcement of a restrictive covenant is rooted in two separate principles. The first principle was discussed by the Florida Fourth District Court of Appeal in Northern Trust Investments, N.A. v. Domino, 896 So. 2d 880, 882 (Fla. 4th DCA 2005), stating in pertinent part:

A party is not entitled to enjoin the breach of a contract by another, unless he himself has performed what the contract requires of him so far as possible; if he himself is in default or has given cause for nonperformance by defendant, he has no standing in equity…Having committed the first breach, the general rule is that a material breach of the Agreement allows the non-breaching party to treat the breach as a discharge of his contract liability. If the employer wrongfully refuses to pay the employee his compensation, the employee is relieved of any further obligation under the contract and the employer cannot obtain an injunction.

The principle discussed by the Fourth DCA in Northern Trust is that a prior material breach of an employment agreement by an employer prevents the employer from being able to enforce a restrictive covenant contained in the agreement against the former employee. Based on the foregoing, the Fourth DCA denied the employer’s temporary injunction against the former employee because the employer breached the employment agreement by failing to properly compensate the former employee.

The second principle is a one of contract law that was discussed by the Florida Supreme Court in Shavers v. Duval County, 73 So. 2d 684 (Fla. 1954), stating:

It has long been firmly established that the laws existing at the time and place of the making of the contract and where it is to be performed which may affect its validity, construction, discharge and enforcement, enter into and become a part of the contract as if they were expressly referred to or actually copied or incorporated therein.

Florida appellate courts also have applied this principle since the Supreme Court’s decision in Shavers. See Florida Beverage Corp. v. Div. of Alcoholic Beverages & Tobacco, Dept. of Bus. Regulation, 503 So. 2d 396 (Fla. 1st DCA 1987); General Development Corporation v. Catlin, 139 So. 2d 901 (Fla. 3d DCA 1962).

Because the laws existing at the time and place of the making of the contract become part of the contract, that means that the FLSA is incorporated into every employment contract. Thus, any violations of the FLSA by an employer could constitute breach of the employment contract which, as discussed supra, could prevent the enforcement of any restrictive covenants contained in the employment contract. If you are an entrepreneur engaged in non-compete covenant litigation with a former employer or you simply want more information regarding non-compete agreements, Peter Mavrick is a Miami non-compete lawyer who can assist you.

The Miami non-compete attorneys at the Mavrick Law Firm have successfully represented many businesses in Florida non-competition covenant litigation in the Miami-Dade, Broward, and Palm Beach County areas encompassed by the Third and Fourth District Courts of Appeal, as well as Hillsborough, Sarasota, and other counties encompassed by the Second Circuit Court of Appeal. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.