Introduction: Navigating the complexities of non-compete agreements can be a challenge for employers and employees alike in Florida. This blog post will delve into the statutory requirements for non-compete agreements established by Section 542.335, Florida Statutes, as well as the traditional contract principles impacting their enforcement. We will also discuss the protection of referral sources and patient lists under Florida law. Understanding these requirements and principles is vital for businesses looking to safeguard their competitive interests while remaining compliant with the law.
I. Statutory Requirements for Non-Compete Agreements in Florida Section 542.335 of the Florida Statutes sets forth the following requirements for enforceable non-compete agreements, or “restrictive covenants”:
- Written and Signed: The restrictive covenant must be set forth in writing and signed by the person against whom enforcement is sought (§ 542.335, Fla. Stat.).
- Reasonable Scope: The restrictive covenant must be reasonable in relation to time, area, and line of business (§ 542.335, Fla. Stat.).
- Legitimate Business Interests: The employer must prove the existence of one or more legitimate business interests justifying the restrictive covenant and that the contractually specified restraint is reasonably necessary to protect the established interests of the employer (Autonation, Inc. v. O’Brien, 347 F. Supp. 2d 1299, 1304 (S.D. Fla. 2004) (interpreting Florida law)).
Florida law generally defines legitimate business interests to include, but not be limited to:
a. Trade secrets, as defined in s. 688.002(4).
b. Valuable confidential business or professional information that otherwise does not qualify as trade secrets.
c. Substantial relationships with specific prospective or existing customers, patients, or clients.
d. Customer, patient, or client goodwill associated with: i. An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress”; ii. A specific geographic location; or iii. A specific marketing or trade area.
e. Extraordinary or specialized training (§ 542.335(1)(b), Fla. Stat.).
II. Traditional Contract Principles Impacting Non-Compete Agreements In addition to the statutory requirements, non-compete agreements must also adhere to traditional contract principles for enforcement. These principles include:
- Offer and Acceptance: Both parties must clearly express their intention to enter into the non-compete agreement, and the terms must be agreed upon by both parties.
- Consideration: Both parties must exchange something of value in the agreement, such as an employee receiving compensation in exchange for agreeing not to compete with the employer for a specified period.
- Legality: The non-compete agreement must be lawful and not against public policy.
- Capacity: Both parties must have the legal capacity to enter into the agreement, meaning that they must be of legal age and sound mind.
- Mutual Assent: Both parties must clearly understand and agree to the terms of the agreement, without any misrepresentation, fraud, duress, or undue influence.
III. Non-Compete Agreements: Protecting Referral Sources and Customer Lists Non-compete agreements can be used to protect various business interests, including referral sources and patient lists, as long as they meet the statutory requirements and traditional contract principles
- Protecting Referral Sources: Non-compete agreements may be used to protect referral sources, which are essential to many businesses, particularly those in service industries. Courts will generally enforce non-compete agreements that protect referral sources, provided that the terms are reasonable and necessary to protect the employer’s legitimate business interests.
- Protecting Customer Lists: In the nearly all industries, customer lists are considered valuable assets that warrant protection. Non-compete agreements can be used to protect these lists, but must be drafted carefully to ensure compliance with applicable laws.
IV. Enforceability of Non-Compete Agreements in Florida courts will enforce non-compete agreements as long as they meet the statutory requirements set forth in Section 542.335, Florida Statutes, and adhere to traditional contract principles. If a non-compete agreement is found to be overly broad or unreasonable, a court may modify or “blue pencil” the agreement to make it enforceable within reasonable limits.
Conclusion: Non-compete agreements serve as valuable tools for businesses to protect their competitive interests in Florida. By adhering to the statutory requirements established by Section 542.335, Florida Statutes, and traditional contract principles, businesses can successfully protect their referral sources and patient lists while remaining compliant with Florida law. Employers and employees should consult with experienced legal counsel to draft, review, and enforce non-compete agreements to ensure that they are enforceable and in compliance with Florida law.