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Employers Cannot Enforce Florida Non-Compete Agreements Without First Establishing a Legitimate Business Interest

Posted in Labor & Employment

Whether a party is enforcing or defending against enforcement of a Florida non-compete agreement, it is critical to remember that the agreement is unenforceable unless there is a legitimate business interest. To this point, Florida Statute § 542.335(1)(b) provides:

The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.

A 2003 decision by Florida’s Fourth District Court of Appeal illustrates a court’s unwillingness (and inability) to enforce a non-compete agreement when an employer cannot establish a legitimate business interest. See Passalacqua v. Naviant, 844 So. 2d 792 (Fla. 4th DCA 2003). In Naviant, the employer provided “opt-in email marketing” which offered marketing services through the internet. The employee in Naviant applied and received a job for the employer wherein he signed a non-compete agreement. The non-compete provided that in exchange for receiving compensation, the employee “will not, for a period of two (2) years after the end or termination of individual’s relationship with corporation … engage in a business in the continental United States that is the same or similar to the [business of the company].” Id. at 794.

Three weeks after starting work for his employer, the employee in Naviant left the company to start up his own business as a direct competitor of his employer. The employer, in turn, brought an action against the former employee seeking to enforce the non-compete agreement. The trial court entered a non-final order enforcing the non-compete agreement and the former employee appealed. On appeal, the Fourth District reversed, finding that the record below lacked the showing required to grant an injunction enforcing the non-compete. Id. at 797.

In reviewing the record below, the Fourth Circuit found that the “case contains nothing constituting proof of any ‘legitimate business interest,’ as defined in the statute …” Instead, the court found that the only testimony presented in support of the employer’s claims was that of its CEO who testified that the employee misappropriated employer data and solicited customers. The court, however, noted that not one of the customers allegedly solicited were named in the complaint, motion for injunction or any of the exhibits. Instead, the CEO testified that his company had developed a unique methodology which allowed it to capture a large part of the market over the years. However, the appellate court was not convinced, instead finding that the employer’s marketing was not unique. For example, the marketing manual the employer relied upon “was anything but a compilation of widely known and commonly used sales and marketing techniques.” Id. at 796.

Variant serves as a reminder that employers, when seeking to enforce non-compete agreements, have to do more than assert customers were contacted or marketing ideas were duplicated. Instead, applying the rationale of Variant, employers should be prepared to identify specific customers who were solicited by the employee or unique marketing strategies that are proprietary and subject to protection. The employer in Variant did not go far enough in proving its case, resulting in a reversal by the appellate court.

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Jason Cornell is an equity partner with the law firm Fox Rothschild LLP. Jason practices in Fox Rothschild’s Litigation and Family Law departments in West Palm Beach, Florida. Jason focuses his practice on commercial and civil litigation throughout Florida, with an emphasis on non-compete litigation. You can reach Jason at (561) 804-4415 or jcornell@foxrothschild.com.

Below are some recent posts Jason has written on Florida non-compete litigation:

Common Defenses to Enforcement of a Non-Compete Agreement

Are Non-Compete Agreements Enforceable Against Third Parties?

What Are the Burdens of Proof When Enforcing a Non-Compete Agreement?

Florida’s Fifth District Narrowly Construes Geographic Scope Provision in Non-Compete Agreement