Non-Compete Agreements are increasingly commonplace in the State of Florida. On a basic level, a non-compete agreement, also called a restrictive covenant, is most often a contract between an employer and an employee (or independent contractor) whereby the employee or independent contractor agrees not to compete with the employer in the same profession or industry for a specified period of time upon termination of the employer-employee/independent contractor relationship.
In the State of Florida, non-compete agreements are governed by Florida Statute 542.335 which contains several requirements in order for a non-compete agreement to be considered a valid, enforceable agreement:
- The non-compete agreement must be reasonable in time, area, and line of business
- It must be in writing and signed by the party against whom enforcement is sought; and
- It must be justified by a “legitimate business interest” which may include, but is not limited to: (a) trade secrets, (b) confidential business information, (c) substantial relationships with specific customers/clients, (d) customer/client goodwill associated with (i) an ongoing business practice via a trade name, trade mark, service mark or trade dress, (ii) a specific geographic location or (iii) a specific marketing or trade area; or (e) extraordinary or specialized training.
Additionally, the non-compete agreement must be reasonably necessary to protect the legitimate business interest justifying the non-compete agreement.
One issue that is often a point of contention in a lawsuit to enforce a non-compete agreement is a disagreement concerning the time period in which the non-compete agreement is “in effect” or enforceable. For instance, suppose a non-compete agreement between an employee and employer prohibits the employee from competing with the employer for a period of 2 years following termination of employment. The employee is terminated and shortly thereafter, the employee begins to compete directly with the former employer. Suppose further that the former employer desiring to enforce the non-compete agreement does not learn of the former employee’s breach of the agreement until a few months prior to the expiration of the 2 year non-compete period. The former employer immediately seeks counsel and a lawsuit is subsequently filed to enforce the non-compete agreement on behalf of the former employer prior to the expiration of the 2 year non-compete period. The lawsuit seeks a preliminary and permanent injunction against the former employee to prevent the former employee from competing with the former employer and violating the non-compete agreement. Upon review of the complaint and a copy of the non-compete agreement, the attorney representing the former employee will undoubtedly argue that the lawsuit is moot because the term of the agreement will expire before the former employee will be able to obtain an injunction, and moreover, any injunction that the former employer obtains will only enjoin the former employee from competing for the small amount of time remaining on the 2 year non-compete period.
However, assuming the court finds the non-compete agreement reasonable and enforceable, case law in Florida bestows upon the court the discretion to equitably extend the term of a non-compete agreement when a breach of the non-compete agreement has been shown. Meaning, the court has authority to enter an injunction for an entire 2 year period as opposed to only the few months remaining on the non-compete period. See Michele Pommier Models, Inc. v. Diel, 886 So.2d 993, 995 (Fla. 3d DCA 2004) (“It is well established that Florida case law permits a non-compete period to be equitably extended to allow for what was intended in the bargain.”). This is what happened in Capelouto v. Orkin Exterminating Co. of Florida, 183 So.2d 532, 534 (Fla. 1966) where the Court enjoined a former employee from competing with his former employer for a period of 2 years from the date the injunction was entered instead of only for the short time remaining on the term of the non-compete agreement. (“…the appellee-employer was entitled to have a period of two years during which the appellant-employee would not be inc competition with it and in contact with its customers in the arena involved.”); See also Kverne v. Rollins Protective Serv., 515 So.2d 1320 (Fla. 3d. DCA 1987).
However, it’s important to note that a court is not necessarily required to equitably extend the non-compete period when a breach of a non-compete agreement has been shown; it’s up to the court’s discretion. See Sunbelt Rentals, Inc. v. Dirienzo, 487 F.Supp.2d 1361, 1363 (S.D. Fla. 2007). Whether a court is inclined to extend a non-compete period will be determined by the individual facts of each case and the evidence presented to the court which may justify extending the non-compete period. For instance, if the court finds the damage or harm caused by a breach of a non-compete agreement is nominal, then the court may decline to equitably extend the duration of non-compete period. Likewise, if the court determines that the plaintiff can be adequately compensated in the form of damages, or that the plaintiff failed to timely seek enforcement of the non-compete agreement despite knowledge of defendant’s breach of same, then these facts may lead the court to decline to extend the non-compete period.