What agreement was made to grant America the Florida territory? *
Florida's Noncompete Statute: "Reasonable" or "Truly Obnoxious?"
Florida'south noncompete statute, F.Due south. §542.335, governs the enforceability of noncompete agreements. The statute uses the discussion "reasonable," or a derivation of it, 17 times. Reasonableness is the primary standard resorted to throughout the statute to determine whether a noncompete agreement is enforceable. This includes a core requirement in the statute that noncompete agreements must exist "reasonably necessary to protect the legitimate business organisation interest" of the political party trying to enforce the understanding.1
Recently, the Florida Supreme Court in White v. Mederi Caretenders Visiting Servs. of Southeast Florida LLC, 226 So. 3d 774, 2017 WL 405393 (Fla. Sept. 14, 2017), addressed the responsibility of trial courts to evaluate the enforceability of noncompete agreements based on the specific facts of each instance.2 The court in White accustomed jurisdiction because of a direct conflict betwixt Florida'south Fourth and Fifth district courts of appeal on whether a visitor'south referral sources may exist a protectable legitimate business interest sufficient to support the validity of a noncompete agreement.3 In addition to ruling on this precise consequence and property that referral sources tin be such a legitimate business involvement depending on the specific facts of the case,4 the court took the opportunity to reference the reasonably necessary requirements within the noncompete statute.5
That the Florida Supreme Courtroom recently referenced the reasonableness requirements of the noncompete statute is significant, every bit information technology comes after other courts have criticized Florida's noncompete statute. For instance in 2015, the New York Courtroom of Appeals constitute that Florida's noncompete statute was unenforceable considering it was against New York's public policy.6 As will be discussed later, the New York court explained that this public policy exception was reserved for laws that are "truly obnoxious."7 Also, as will be discussed, federal courts and other state courts exterior of Florida have either narrowly interpreted the statute to justify not enforcing noncompete agreements or, like the New York Court of Appeals, straight refused to follow the statute on public policy grounds.
Despite these criticisms, the Florida Supreme Court in White expressed its commitment to exist guided by the legislative intent and the plain language of the statute.8 However, in doing then, the court in White likewise referred to the statute'due south reasonableness requirements and encouraged the active interest of trial courts in assessing the enforceability of noncompete agreements by emphasizing that the trial courts were the all-time able to apply the statute to specific fact situations9 and that the statute "grants trial courts fairly wide discretion to fashion the appropriate context-dependent remedy."10
History of Noncompetes in Florida
In general, noncompete agreements (also referred to as restrictive covenants) are contractual agreements wherein an employee promises not to compete with his or her employer'south business during employment and for a specified time subsequently the termination of such employment. Noncompete agreements tin can include an employee'south understanding not to work for the employer'south competitor(s) and an employee'south agreement not to solicit the employer's customers for a specific flow of fourth dimension.11 In addition to the employee/employer context, noncompete agreements are often utilized between a buyer and a seller in the buy of an ongoing business. The buyer will asking a noncompete agreement from the seller so that the seller does not immediately after the sale of the business start a competing business organization or poach the customers of the business the seller just sold.
In general at mutual police, noncompete agreements were oft found to be void as an improper restraint of trade. This was also the instance under Florida common law,12 until the Florida Legislature statutorily set the guidelines for determining whether noncompete agreements were too restrictive. Florida'southward statutory noncompete provisions have been revised and modified several times by the legislature; in 1996 in that location was a total rewrite of the noncompete statute.13 Since that rewrite, over 20 years agone, no modifications take been made.xiv
• Florida's Electric current Noncompete Statute — Florida's current noncompete statute, §542.335, governs all noncompete agreements entered into on or after July 1, 1996.xv Its fundamental precepts are fairly straightforward. The statute starts with the requirement that noncompete agreements are not prohibited "and then long every bit such contracts are reasonable in time, area, and line of business."sixteen The statute and then provides that a person seeking to enforce a noncompete understanding "must plead and prove the existence of ane or more legitimate business interests justifying the restrictive covenant."17 Side by side, the statute sets forth that legitimate business interests include, but are not limited to, five items: merchandise secrets; valuable confidential information; substantial relationships with customers, patients and clients; goodwill; and extraordinary or specialized training.18 Importantly, the statute also provides that the contractual restrictions must be connected to the protection of legitimate business interests; a person seeking enforcement must prove "the contractually specified restraint is reasonably necessary to protect the legitimate interest…."19
• Two Major Points of Criticism — While the provisions discussed above are standard noncompete principles and provisions that accept generally not been the subject area of criticism and have been enforced past other courts, some of the detailed provisions of Florida's noncompete statute that follow these standard provisions have been deemed unbalanced and excessively pro-employer. Probably the most criticized is the provision that prevents consideration of the damage to the employee: the statute states that "[i]n determining the enforceability of a restrictive covenant, a court shall not consider any individualized economical or hardship that might be acquired to the person against whom enforcement is sought."20 A 2d provision oftentimes criticized is the statute'due south prohibition confronting any rule of contract construction that "requires the courtroom to metaphrase a restrictive covenant narrowly, against the restraint, or the drafter of the contract."21 As employers are typically seeking enforcement of noncompete agreements, these two provisions favor the employer.
Florida'due south Noncompete Statute Under Attack
The criticism of Florida'southward noncompete is not new. It is worth noting that, dissimilar other legislative measures that were adopted by Florida from a compatible code prepared by a committee of experts to promote uniformity among the states,22 there is not an accepted compatible noncompete statute. Consequently, how states care for noncompete restrictions varies considerably. At 1 end of the spectrum, California does not permit noncompetes except in connexion with the sale of a business.23 Equally a result, California is viewed equally a pro-employee public policy land. On the other stop of the spectrum is Florida, which is considered to have the well-nigh pro-employer noncompete statute in the country.24 Despite well-known and accepted diversity in state noncompete laws, the criticism of Florida's noncompete statute seems lately to be more intense and at higher levels.
• Criticism by New York'due south Highest Court — The New York Court of Appeals (the state'due south highest state court) in Brown & Brown, Inc. v. Johnson, 34 N.E.3d 357 (2015), refused to enforce Florida'due south noncompete statute considering it was contrary to public policy. In the words of that court, the statute failed the "truly obnoxious" test.25
The facts of Brown & Brown were not specially unique. The employee was hired past the plaintiff, a Florida corporation, to perform job duties in New York. Pursuant to the terms of the employment agreement, the parties agreed to a selection-of-law provision stating that disputes over the agreement would be governed by Florida law.26 The employment agreement also independent noncompete restrictions in the form of a nonsolicitation clause that precluded the employee from soliciting customers of the New York offices of Brown & Brown for two years after her employment with the company.27
Later on several years of employment, the employee was terminated. Within one month thereafter, she began to work for a competitor providing services to former customers of Dark-brown & Brown.28 A lawsuit was brought in New York alleging that the employee breached the nonsolicitation clause past soliciting Brown & Brown's customers.
Equally a upshot, New York's highest court in Brownish & Brown ultimately addressed whether Florida's noncompete statute was enforceable in New York courts. The court was straight in stating that although the parties are generally complimentary to contract as they wish, including choice of police provisions, New York courts would non enforce agreements where the chosen law violated "some key principle of justice."29 The court further explained that this public policy exception was reserved "for those foreign laws that are truly obnoxious."30
In its public policy analysis, Brown & Brownish acknowledged that Florida and New York laws were similar in that restrictive covenants were required to exist reasonable as to fourth dimension, telescopic, and geographical area, and must exist tied to a legitimate business purpose.31 However, other provisions of Florida'southward noncompete statute were noted equally non similar. 1 of those was Florida's explicit prohibition against considering the hardship that enforcement of the noncompete understanding would place on the former employee.32 This contradicted New York law that requires a courtroom to consider whether the noncompete agreement imposes undue hardship on the employee.33 A second provision that was singled out in Brown & Brown every bit non similar to New York police was Florida'due south noncompete statutory provision requiring that courts construe restrictive covenants in favor of the employer and not utilise contract construction rules to translate the restrictive covenant narrowly or confronting the restraint.34 The courtroom explained that New York construes noncompete agreements strictly based on the public policy of not wanting to sanction the loss of a person'south livelihood.35
Consequently, the court in Dark-brown & Dark-brown concluded that Florida's noncompete statute had a "nearly-exclusive focus on the employer's interests" in its prohibition against narrowly construing restrictive covenants and its refusal to consider the damage to the employee.36 Every bit such, the New York Court of Appeals institute the awarding of Florida law would be offensive to a cardinal New York public policy and, therefore, the choice of police force provision choosing Florida law was unenforceable on that basis.37
• Federal Courts Consider Harm to Employee — Additionally, federal courts applying Florida's noncompete statute have found a style to consider the harm to the employee. In Transunion Risk and Alternative Data Solution, Inc. v. MacLachlan, 625 Fed. App'x 403 (11th Cir. 2015), the court reversed a district court'south finding that Florida'southward noncompete statute precluded the consideration of the hardship to a defendant employee where a preliminary injunction was sought.38 In Transunion, the 11th Circuit was confronted with a purported conflict betwixt the Florida noncompete statute and Fed. R. Civ. P. 65, which requires that a party seeking preliminary injunctive relief must, amidst other things, constitute that the "threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party."39 The 11th Circuit decided that Florida's noncompete statute did not conflict with Rule 65 because the statute merely limited what could be considered for purposes of determining "enforceability" and not specifically the blazon of remedy.40 In other words, co-ordinate to the 11th Circuit, a noncompete agreement might all the same be enforceable, merely not through the remedy of a preliminary injunction. Consequently, the 11th Excursion vacated the preliminary injunction and remanded the matter to the trial court to residual the hardship under Rule 65.41 The console of the 11th Circuit issuing the opinion did not designate its conclusion for publication — meaning that it is not considered binding precedent, but may be cited as persuasive precedent.42
However, a commune court in Florida has subsequently cited Transunion equally authority and followed its holding. In Lucky Cousins Trucking, Inc. v. QC Energy Resources Texas, LLC, 223 F. Supp. 3d 1221, 1224 (M.D. Fla. 2016), the district court was asked to enter an injunction pursuant to Florida's noncompete statute, but refused, in role, because of the damage to the political party confronting whom the injunction was sought. The court specifically cited the 11th Circuit's Transunion determination and its finding that the court must consider the harm to the individual in issuing an injunction to enforce noncompete agreements under Florida law.43 On the other hand, a Florida district court of appeals determination handed downward less than three months after Transunion refused to consider the harm to the employee.44
• Other Out of State Courts Detect Noncompete Statute Confronting Public Policy — In addition to New York, the 11th Circuit, and federal district courts in Florida, other out-of-state courts have addressed §542.335 and found that Florida's noncompete statute was likewise astringent and should not be enforced.
In Unisource Worldwide, Inc. v. S. Central Ala. Supply, LLC, 199 F. Supp. 2d 1194 (One thousand.D. Ala. 2001), the court considered whether enforcing a choice of law provision (providing for Florida law) relating to a noncompete agreement would be reverse to the cardinal policy of the state of Alabama. The court pointed to the same two provisions that New York's highest courtroom would single out years after — the provision stating that the courts shall not consider the hardship of the employee, and the provision against any rule of contract construction that requires the court to construe a restrictive covenant narrowly or confronting restraint.45 The court ultimately held that because Florida law on noncompete agreements was contrary to Alabama public policy, the choice of police provision would not stand and Alabama law would instead be applied.46
Similarly, in 2008, an Illinois appellate court refused to enforce a option of law provision that required that Florida law be practical. In that case, Brown and Brown, Inc. five. Mudron, 379, 887 N.E.second 437 (2008), the effect was whether application of Florida'south noncompete statute was contrary to the public policy of Illinois. The court held that under Illinois law, "a court must consider the hardship the covenant imposes upon the individual employee."47 Notwithstanding, Florida'southward noncompete statute specifically prohibited consideration of the damage to the employee. Consequently, the courtroom ended that Florida'south noncompete law was contrary to the public policy of Illinois and would not be applied.48
Also, the court of appeals in Georgia in Carson 5. Obor Holding Company, LLC, 734 Due south.E.2nd 477 (2012), refused to accolade a choice of law provision requiring that Florida constabulary apply to a noncompete agreement. The court, in refusing to use Florida law, stated that nether Georgia law the court in because the reasonableness of the restriction must consider and residuum the interests of both parties, including the political party existence restricted by the noncompete agreement.49
Florida Supreme Court in White Emphasizes Reasonableness and Context-Dependent Aspects of Statute
It is against this backdrop of criticism that the discussion in White concerning the statute'south reasonableness standard and that it was context-dependent may have more than meaning. But before because this, the procedural history of White and the precise result that was directly before the court should also be understood.
• Procedural History of White and the Precise Issue Presented — The court in White recognized a disharmonize between Florida'due south 4th and 5th district courts of appeal regarding the statutory interpretation of a protectable legitimate business organisation interest. Consequently, the Florida Supreme Court consolidated the cases from the two district courts for purposes of its decision in White.fifty The issue for consolidated appellate review was whether referral sources for the abode health services industry — which were the patients' physicians and not the patients themselves — could exist a legitimate business interest nether Florida'southward noncompete statute.51 According to the statute, a noncompete agreement must be supported past at least one "legitimate business concern involvement," which is defined equally "including but not express to" a listing of v items. The tertiary detail, equally reflected in §542.335(1)(b)(3), is relationships with "customers, patients, or clients."
In Hiles 5. American Home Therapy, Inc. 183 So. 3d 449, 454 (Fla. 5th DCA 2015), it had been held that referral sources were not specifically "customers, patients, or clients" and, therefore, were necessarily not protectable interests. To the contrary, in the Quaternary DCA example — Mederi Caretenders Visiting Services of Southeast Florida, LLC v. White, 179 So. 3d 564, 564 (Fla. quaternary DCA 2015) — it was ruled that such referral sources were protectable legitimate business interests. In the consolidated appellate review, the Florida Supreme Courtroom in White reasoned that the language "includes, just is not limited to" shows that the listing of protectable interests was not an exhaustive list, and there was "clearly no exclusion in the statute for referral sources."52 Information technology farther held that "referral sources may be a protected legitimate business organization involvement within the pregnant of F.S. §542.335, depending upon the context and proof adduced" (the context and proof adduced to be determined past the trial courtroom).53 Chiefly, the court in White besides acknowledged that it could not resolve all the factual questions and instructed that the cases be remanded all the way back to the trial courts.54 Due south o the precise effect ruled upon by the court was a adequately narrow one — the plain significant of the statutory language "including, just not limited to," an issue that was properly earlier the court and needed to exist resolved, merely arguably non requiring a 25-page decision.
• White Seemingly Goes Across Issues Presented — Indeed, it tin be argued that the Florida Supreme Court'southward opinion in White went beyond what was necessary for the precise result before it, presumably to provide clarification and guidance to the lower courts concerning Florida'due south noncompete statute. Even though the court stated that the reasonable scope of the covenants was not before information technology,55 in that location were significant references in the stance concerning the reasonableness requirements and the fact-specific nature of applying the statute.
For example, the court raised the topic of whether Florida's noncompete statute was too restrictive. It then offered a wide explanation or justification that the "statute ameliorates concerns regarding overly restrictive covenants" considering its statutory linguistic communication "commands courts to alter…noncompetition agreements that are 'overbroad, overlong or otherwise not reasonably necessary to protect the legitimate business involvement' instructing courts to 'grant only the relief reasonably necessary to protect such interest.'"56 The emphasis on the statute's reasonable standard every bit a check to overly restrictive covenants did not appear to be a random interjection into the opinion; it was more than an intended topic in need of word.
Additionally, even though the White opinion did non cite to the cases that have criticized Florida's noncompete statute, the language in White touched upon (merely without straight addressing) the criticisms — including the prohibitions confronting consideration of the hardship on the employee and against using rules of contract construction to construe a noncompete agreement narrowly or against the restraint.
• Considering the Hardship to the Employee — The court in White made no direct reference to the statutory prohibition in Florida'south noncompete statute to balancing or considering the harm to the employee, the provision that was found in New York to be "truly obnoxious" and that the 11th Excursion in Transunion side-stepped by narrowly interpreting it equally not applying in the context of injunctive relief under Rule 65.
However, there is language in White suggesting that the interests of and hardship on the employee are not to exist totally ignored. The court pointed out that the noncompete statute must be viewed against the history that contracts in restraint of trade are generally unlawful, and that the statute was a cleave-out or exception to such general prohibition that "strikes a delicate balance between legitimate business organisation interests and a person'due south inalienable correct to piece of work."57 The inalienable right to work is protected by the Florida Constitution.58
Additionally, the courtroom, while trying to harmonize the noncompete statute regarding protectable interests with its earlier analysis of restraints of merchandise, quoted, in a parenthetical, language in Capelouto v. Orkin Extermination Co. of Fla. Inc. , 183 So. 2d 532, 534 (Fla. 1966), indicating that noncompete agreements should be enforced in such a manner as to "protect the legitimate interests of the employer without doing harm to the public interest, and without inflicting an disproportionately harsh or oppressive result on the employee. "59 This inclusion of the impact on the employee seems opposite to a strict prohibition confronting consideration of the employee'southward hardship.
Can it be inferred from language in White that consideration of the hardship to the employee might be pertinent? Does the court's references to the constitutional inalienable right to work, the ability of the courts to modify noncompete agreements that are non reasonably necessary, and the statute's instruction to the courts to grant just relief that is reasonably necessary support such an inference? Might the Florida Supreme Court agree with the 11th Excursion opinion in Transunion and rule that the prohibition against consideration of the harm to the employee but applies to "enforcement" and not the "remedy"? No one knows, every bit the Florida Supreme Court has non precisely ruled on these issues, but it tin can exist surmised from the White opinion that trial courts accept considerable discretion to employ the reasonableness standard, and its findings should necessarily be context-based and fact-specific. In other words, at that place may be more than one way for the trial court to peel the proverbial cat.
• Rules of Contract Construction — The White conclusion made a more direct reference to the provision in the noncompete statute that "a court shall non utilise whatsoever rule of contract construction that requires the court to construe a restrictive covenant narrowly, against the restraint." This is the same provision that New York and other courts accept found to be and so slanted toward the employer and against the employee as to violate public policy. The court in White briefly mentioned the criticized provision and then tried to minimize its actual impact. It best-selling the provision "restricts courts from applying certain rules of contract construction,"60 but and so immediately balanced that in the very same sentence past emphasizing the statute also grants "the trial courts' adequately wide discretion to way the advisable context-dependent remedy."61 A gain, the courtroom relied on the reasonableness standard within the statute and the demand to employ that standard to the specific facts in each case to counter assertions that the statute was too restrictive. Indeed, the court in White held that the two cases consolidated earlier it for appellate review should be remanded all the mode dorsum to the trial courts to resolve bug of fact.
Decision
Returning to the question of whether Florida's noncompete statute is reasonable or truly obnoxious, courts critical of the statute seem resolute in their opinion that sure provisions unfairly stack the deck against the employee and in favor of the employer. Withal, the Florida Supreme Courtroom seems equally determined to follow the intent and obviously language of the statute while likewise emphasizing the statute's reasonableness standard and that trial courts take wide latitude to consider the specific facts of the instance. And then for the time being, New York's highest court is likely to go along to view Florida's noncompete statute as against public policy, and the Florida Supreme Courtroom sees it as reasonable. What is "reasonable" and what is "obnoxious" may be like dazzler: to some extent in the eye of beholder.
i Fla. Stat. §542.335(1)(c) (2016).
2 White, 2017 WL 405393 at *8-9.
three Id. at *1.
4 Id. at *ten.
five Id. at *8-9.
6 Brown & Brown, Inc. v. Johnson, 34 N.Due east.3d 357, 361 (2015).
7 Id. at 360 (quoting Conney v. Osgood Mach. , 612 N.East.2d 277, 284 (1993)).
8 White, 2017 WL 405393 at *3.
nine Id. at *9.
10 Id.
xi Hilb Rogal & Hobbs of Florid, Inc. five. Gimmel, 48 So. 3d 957, 960- 62 (Fla. 4th DCA 2010 ); Environmental Services, Inc. 5. Carter, 9 So. 3d 1258, 1262 (Fla. 3d DCA 2009).
12 Love five. Miami Laundry Co. , 160 And so. 2d 32, 34 (Fla. 1934).
thirteen In 1953, Fla. Stat. §534.12 was enacted and so eventually replaced by Fla. Stat. §534.33. In 1996, the current noncompete statute was enacted.
14 White, 2017 WL 405393 at *ten, due north.1.
fifteen Fla. Stat. §542.335(3) (2016).
16 Fla. Stat. §542.335(1) (2016).
17 Fla. Stat. §542.335(1)(b) (2016).
18 Fla. Stat. §542.335(1)(b)(ane-five) (2016).
xix Fla. Stat. §542.335(1)(c) (2016).
twenty Fla. Stat. §542.335(ane)(thousand)(1) (2016).
21 Fla. Stat. §542.335(one)(h) (2016).
22 As examples, Florida has adopted the Uniform Commercial Code ( Fla. Stat. §671.101, et seq. ) and Uniform Merchandise Secrets Act ( Fla. Stat. §688.001, et seq. ).
23 Edwards v. Arthur Anderson LLP, 189 P.3d 285 (2008) (the California Supreme Court confirmed its long standing public policy that employee noncompete agreements are not enforceable).
24 Due north orman D. Bishara, Fifty Ways to Leave Your Employer: Relative Enforcement of Covenants Non to Compete, Trends, and Implications for Employee Mobility Policy, 13 U. Pa. J. Bus. Fifty. 751, 785 (Bound 2011).
25 Brown & Brown, 34 N.East.3d at 360.
26 Id.
27 Id. at 359.
28 Id.
29 Id. at 360.
thirty Id. (quoting Conney v. Osgood Mach., 612 N.East.2nd 277, 284 (1993)).
31 Id.
32 Id. at 361.
33 Id.
34 Id.
35 Id.
36 Id.
37 Id.
38 Transunion, 625 Fed. App'ten at 404.
39 Id.
40 Id. at 407.
41 Id.
42 U.Due south. Ct. of App. 11th Cir. R. 36-2.
43 Lucky Cousins Trucking, 223 F. Supp. 3d at 1224.
44 In Florida Digestive Wellness Specialists, LLP v. Romon E. Loma, Thou.D. LLC, 192 So. 3d 491 (Fla. 2d DCA 2015), Florida's 2d District Court of Appeal held that whether the employee — confronting whom an injunction was sought — would suffer greater harm from the imposition of the injunction is not to be considered because the noncompete statute in §543.335(i)(g) explicitly prohibits such consideration. In making this ruling, the Second DCA relied upon and was supported by an earlier opinion by the Get-go DCA in Depuy Orthopaedics, Inc. 5. Waxman, 95 So. 3d 928 (Fla. 1st DCA 2012).
45 Unisource Worldwide, 199 F. Supp. 2nd at 1201.
46 Id. at 1202.
47 Brown and Brown, Inc. v. Mudron, 887 N.East.2d at 440 (2008).
48 Id.
49 Carson, 734 S.Eastward.2d at 483.
50 White, 2017 WL 405393 at *1.
51 Id.
52 Id. at *5.
53 Id. at *nine.
54 Id.
55 Id.
56 Id.
57 Id. at *8.
58 Id. (citing Fla. Const. fine art. I, §2).
59 Id. at *viii (emphasis added).
60 Id. at *ix.
61 Id.
Hank Jackson is a trial attorney with Shutts & Bowen LLP. He regularly represents companies and individuals in a variety of business organization disputes. He has extensive experience litigating noncompete restrictions arising out of the auction of a business equally well as employment relationships.
Source: https://www.floridabar.org/the-florida-bar-journal/floridas-noncompete-statute-reasonable-or-truly-obnoxious/
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