Under Florida law, any contract in restraint of trade (of which a covenant not to compete is categorized) falls under the province of § 542.335, Florida Statutes. This statute, which modified the former statute, § 542.33, Florida Statutes, came into effect in 1996, and applies to all restrictive covenants that were entered into after July 1, 1996. This change in the law was based, in large measure, upon the opinion of the Second District Court of Appeal in Hapney v. Central Garage, Inc., 579 So.2d 127 (Fla. 2d DCA 1991). In particular, the primary distinction between the prior statute and the 1996 statute is the fact that, now, in order to enforce a restrictive covenant, the employer must “plead and prove the existence of one of more legitimate business interests justifying the restrictive covenant.” The statute sets forth that the term legitimate business interest includes, but is not limited to:
1. Trade secrets, valuable confidential business or professional information that otherwise does not qualify as trade secrets;
2. Substantial relationships with specific prospective or existing customer, patients, or clients; or
3. 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
c. A specific marketing or trade area, or extraordinary or specialized training
The statute then goes on to state that any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable. For your reference, I have attached to this correspondence a copy of the statute.
Restrictions Protect Legitimate Business Interest
Additionally, the new statute also provides that any “person seeking enforcement of a restrictive covenant also shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interest justifying the restriction.” If a person seeking enforcement of the restrictive covenant is able to so plead and establishes on a “prima facie” basis that the restriction protects a legitimate business interest, then the person defending the restriction has the burden of establishing that the restriction is either overbroad, overlong, or not reasonably necessary to protect the legitimate business interest. If this occurs, then a court is empowered to modify the restraint and grant only the relief necessary to enforce the restraint. Along these lines, courts will narrowly tailor the relief to protect the legitimate business interest. See Business is Business: Recognizing Referral Relationships as Legitimate Business Interests Protectable by Restrictive Covenants in Florida, 82 Fla. Bar Journal, March 2008. It should further be noted that the statute entitles a court to award attorneys fees and costs to the prevailing party in any such action
If you have a situation you would like to discuss with Fred Zinober concerning covenants not to compete, contact FL attorney Fred Zinober at 1-866-969-2889.
