Enforcing Non-Competition, Non-Solicitation, and Confidentiality Provisions in Florida: What Employers Need to Know
September 17, 2019
If you own a business in a competitive industry, you undoubtedly know that turnover is inevitable. With the separation of an employee or business partner can come the risk of exposing confidential information, proprietary methods and trade secrets, along with the loss of referral sources or goodwill in the marketplace. One effective way to protect your business interests is to include restrictive covenants, also known as non-competition, non-solicitation or confidentiality provisions, in your employment or contractor agreements. These types of restrictions against competition, solicitation or the use of your confidential information or trades secrets can be particularly valuable for:
- C-suite executives and upper-level managers
- Sales and recruiting positions
- Independent contractors
- Business partners, managing members of a company or shareholders of a corporation
- Joint Ventures
Language matters, though. Simply searching for noncompetition, nonsolicitation or confidentiality provisions online to paste into your documents could be a costly mistake. A noncompetition, nonsolicitation or confidentiality provision is only valuable if it can be enforced. There are legal requirements set forth by the Florida legislature in Section 542.335 of the Florida Statutes that must be met, including that the covenant be “reasonable” in time, area and line of business. The restrictive period in a noncompetition covenant sought to be enforced against a former employee, for example, is generally presumed unreasonable if the duration exceeds two years. The noncompetition, nonsolicitation or confidentiality provision must also be in a writing signed by the person against whom enforcement of the covenant is sought, so it would not be enough under Florida law to simply include a written policy in your employee handbook, which is typically not a contract
As the Supreme Court of Florida made clear in its opinion in White v. Mederi Caretenders Visiting Servs. of. S.E. Fla. LLC, 226 So. 3d 774 (Fla. 2017),reasonableness is the main factor Florida courts use to determine whether a non-competition covenant is enforceable under the statute. Central to that determination is whether the non-competition covenant is “reasonably necessary to protect the legitimate business interest” of the person who seeks to enforce the covenant. The question that follows, of course, is what qualifies as a “legitimate business interest?”
Fortunately, the statute provides some guidance, stating that the term “legitimate business interest” includes, but is not limited to:
1. Trade secrets (as defined in Florida Statutes section 688.002(4)).
2. Valuable confidential business or professional information that otherwise does not qualify as trade secrets.
3. Substantial relationships with specific prospective or existing customers, patients, or clients.
4. Customer, patient, or client goodwill associated with:
a. An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress;”
b. A specific geographic location; or
c. A specific marketing or trade area.
5. Extraordinary or specialized training.
The “includes, but is not limited to” language of the statute makes clear that this list is not exhaustive, and in fact, the court in White held that referral sources can qualify as a legitimate business interest in certain factual situations.
Other factors the court will consider include the effect of the enforcement of the restriction upon the public health, safety and welfare—in other words, whether enforcement of the non-competition covenant would violate public policy. But the court is not permitted to under Section 542.335 of the Florida Statutes to consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought. The Supreme Court of Florida seemed to imply inWhite, however, that harm to the former employee should not be ignored altogether. And at least one federal court in Florida has squarely refused to enter an injunction pursuant to the statute, in part because of the harm to the party against whom the injunction was sought. See Lucky Cousins Trucking, Inc. v. QC Energy Res. Texas, LLC, 223 F. Supp. 3d 1221, 1224 (M.D. Fla. 2016) (relying on Transunion Risk & Alternative Data Solution, Inc. v. MacLachlan, 625 F. App’x 403 (11th Cir. 2015)).
Additionally, it’s important to understand the distinction between a noncompetition covenant and other types of restrictive covenants, such as non-solicitation provisions and confidentiality or non-disclosure provisions. A lawyer can help you navigate these distinctions and comply with the necessary legal requirements to ensure not only that the covenant fits your particular business needs, but that it will be enforceable under Florida law. If the court finds that your noncompetition covenant is enforceable, it may award money damages or injunctive relief to prevent further violations.
The bottom line: it is important you consult and engage an experienced law firm in complex business matters like these. If you need assistance drafting, updating or enforcing a non-competition, non-solicitation or confidentiality provision for your business, contact us here.
Chane Socarras, PLLC is an AV Rated law firm that specializes in representing individuals and businesses throughout Florida and beyond in complex commercial litigation and businesses law, employment law, real estate, construction litigation and general civil litigation.