Florida’s noncompete statute, Fla. Stat. 542.335, provides numerous protections to employers or business purchasers who are looking to safeguard a company’s goodwill, trademarks and the like. Still, it is important to not overreach when drafting a noncompete. By that, should a party have to enforce a noncompete agreement, it will likely do so by seeking an injunction in state or federal court. A good noncompete agreement should balance an employee’s right to earn an income against a business’s right to protect its customer relationships, proprietary information and so on. This post will address some points to consider when drafting a noncompete agreement under Florida law.
Under Fla. Stat. 542.335(1)(a), Florida noncompete agreements are unenforceable unless they are in writing and signed by the person against whom enforcement is sought. By drafting a noncompete agreement, a party satisfies the writing requirement. Equally important, make sure the noncompete agreement is signed by the person you may ultimately seek enforcement against. This can be an employee, a franchisee or a person buying a business.
A noncompete agreement must identify at least one legitimate business which the enforcing party seeks to protect. In an action to enforce the noncompete agreement, if the court finds there is no legitimate business interest, than there is nothing for the court to protect and the enforcing party will not prevail. Florida’s noncompete statute lists five categories of legitimate business interests. A noncompete agreement should spell out that it seeks to protect at least one of these interests. Legitimate business interests include (i) trade secrets; (ii) confidential information; (iii) customer relationships; (iv) customer goodwill; and (v) specialized training.
The lists of legitimate business interests is non-exclusive, meaning other legitimate business interests in addition to the five listed above can be included in the noncompete agreement. Also, the noncompete agreement can, and probably should, list more than one legitimate business interest to protect.
When enforcing a noncompete agreement, the party seeking enforcement must show that the noncompete agreement is reasonably necessary to protect the legitimate business interests. When drafting the agreement, it is important not to overreach. For example, if you are seeking to protect customer relationships for a sales representative that deals with customers only in Florida, it may not be helpful to list the geographic region for enforcement to include the continental United States.
Section 542.335 provides several rebuttable presumptions of how long the enforcement period should last for a noncompete agreement. Be sure to read the statute and consider whether the enforcement period included in your noncompete agreement should follow the presumptions provided for in the statute. For example, for noncompete agreements between the seller and buyer of a business, a court must presume that a duration of 3 years or less is reasonable and that a duration for enforcement of 7 years or more is unreasonable. This does not mean that a noncompete agreement for 10 years is entirely unenforceable. Instead, the enforcing party must overcome the presumption that a 10 year duration is unreasonable.
Finally, even if a court were to find that a provision in the noncompete agreement is too long in duration, too broad in scope, or otherwise unenforceable, the court may still enforce a less restrictive form of the noncompete agreement. This practice is commonly referred to as “blue penciling,” meaning the court can modify, or pencil-in, terms to the noncompete agreement in order to protect the legitimate business interests. Section 542.335(c) specifically provides, “[i]f a contractually specified restraint is overbroad, overlong, or otherwise not necessary to protect the legitimate business interest or interests, a court shall modify the restraint and grant only the relief necessary to protect such interest or interests.” This gives the enforcing party, and the courts, tremendous flexibility when enforcing noncompete agreements to protect the business interests of a company in a reasonable manner.
W Mason is a partner with Fox Rothschild LLP and serves in the Firm’s Litigation and Financial Services Industry departments in Fox Rothschild’s West Palm Beach office. An accomplished business trial attorney, W represents both plaintiffs and defendants in state and federal courts in employment disputes involving restrictive covenants, shareholder disputes, contract disputes, banking litigation, fraud claims, Uniform Commercial Code (UCC) claims, and other commercial disputes.