Business owners in Florida have a divergent view of the enforceability of Non-Compete Agreements in Florida. Many believe that since Florida is a “right to work” state and a non-compete is not worth the paper it is written on. Others think that “a contract is a contract”, and a non-compete is enforceable just like any other agreement. It should come as no surprise that the truth lies somewhere in between. Florida Statute 542.335 provides for enforcement of restrictive covenants, such as non-compete and non-solicitation agreements as long as the covenant is necessary to protect legitimate business interests. Among the legitimate business interests worthy of protection in Florida are trade secrets, specialized training and substantial relationships with specific prospective or existing customers.
The Fifth District Court of Appeal in the case of Evans v. Generic Solution Engineering, LLC, took a narrow view of what exactly constitutes a “substantial relationship with specific prospective or existing customers.” The critical facts are as follows:
Tech Guys provide technical services to online marketing companies through contractors such as Andrew Chinn. Chinn signed a non-compete and non-solicit agreement with Tech Guys, precluding Chinn from working directly with current or former Tech Guys customers for two years after leaving Tech Guys. While at Tech Guys, Chinn provided services to a substantial account of Tech Guys, Robbins Research International, LLC (“RRI”).
Chin then started a competing company. The trial court entered an injunction against Chinn, as a result of his providing services to RRI, in competition with Tech Guys. The Fifth District Court of Appeal, in reversing the injunction, pointed to many factors weighing in favor of Chinn. The Court noted that there is no identifiable agreement with RRI establishing that it would provide Tech Guys with future work. The Court also pointed out that Tech Guys never had an exclusive relationship with RRI and that the RRI business was based upon competitive bidding. Finally, the Court found that Tech Guys declined to work with RRI at industry rates.
Courts throughout Florida do not always agree on precisely what constitutes a substantial customer relationship worthy of protection. Based upon the evidence presented in Evans, the Fifth District Court of Appeal decided to take a narrow view of exactly what constitutes substantial relationship with specific prospective or existing customers.
Sales reps are often under the impression that the relationships that they develop at work belong to them. Many companies realize that these very same customer relationships are critical to continued success. It would be prudent to review agreements with your key executives and sales reps, and prior to hiring new talent, to ensure that you are doing everything possible to protect your important relationships.