In order to establish that a non-compete agreement is lawful and enforceable, the enforcing party must “plead and prove the existence of one or more legitimate business interest justifying the restrictive covenant.” Fla. Stat. § 542.335(1)(b); see also, USI Ins. Services of Florida, Inc., v. Pettineo, 987 So.2d 763, 766 (Fla. 4th DCA 2008). Once the enforcing party establishes that the non-compete agreement is reasonably necessary to protect a legitimate business interest, the burden shifts to the party opposing enforcement of the non-compete agreement to prove that the agreement is overbroad or not otherwise reasonably necessary. Fla. Stat. § 542.335(c); USI Ins. Services of Florida, Inc., v. Pettineo, 987 So.2d at 766, citing Balasco v. Gulf Auto Holding, Inc., 707 So.3d 858, 859 (Fla. 2d DCA 1998).
If the enforcing party establishes that the non-compete agreement was breached by the other party, a presumption of irreparable injury arises and the burden shifts to the party opposing enforcement to establish the absence of such injury. Fla. Stat. § 542.335(1)(j); USI Ins. Services, supra., at 766, citing Am. II Elecs., Inc., v. Smith, 830 So.2d 906, 908 (Fla. 2d DCA 2002)(recognizing that “a party seeking to enforce a restrictive covenant by injunction need not directly prove that the defendant’s specific activities will cause irreparable injury if not enjoined.”)
Pleading and Proving Legitimate Interests
In DePuy Orthopaedics, Inc., v. Waxman, 95 So.3d 928 (Fla. 1st DCA 2012), the First District considered whether a former employer had pled and proved the existence of one or more legitimate business interests as required under § 542.335(1)(b). After considering the record before it, the court in DePuy found that the employer “presented unrebutted evidence that it had legitimate business interests justifying the non-compete covenants.” Id. at 938. The unrebutted evidence the employer presented included proof (1) that it had sold its products in Florida since the 1970s; (2) that its substantial relationships with its customers (including hospitals, surgeons and patients) were damaged by the acts of its former employee; and (3) establishing evidence of a legitimate interest in the specialized training, advertising and professional support it provided to its former employee. Id. at 939.
The court in DePuy also found the former employee began calling on accounts which were located in counties identified in the non-compete agreement. Id. Based on these findings, the court held that the employer “met its burden of establishing that it is substantially likely to succeed against [the employee] in its verified complaint” for injunctive relief. Id.
Employer’s “General Concerns” Do Not Establish Legitimate Interest
DePuy provides a good example of how an enforcing party satisfied its burden of proof under § 542.335(1)(b). In contrast, Gould & Lamb v. D’Alusio, 949 So.2d 1212 (Fla. 2d DCA 2007), illustrates how a party can fail to meet its evidentiary burden under the statute. In Gould, the employer sought enforcement of a non-compete agreement arguing it had demonstrated one or more legitimate business interests, including trade secrets as defined under Fla. Stat. § 688.002(4). In seeking an injunction, the employer relied on the testimony of its president. Id. at 1214. The company’s president testified that the company utilized internal processes that allowed it to work faster than its competitors. Id. The president further testified that, through the injunction, the employer wished to protect “marketing plans, product plans, business strategies, financial information, forecasts and the like.” Id.
After considering the evidence, the trial court in Gould found that the employer did not “prove the existence of trade secrets or that restraint was reasonably necessary to protect legitimate business interests of [the employer].” Id. The Second District agreed, holding that “[g]eneralized statements of concern cannot substitute for proof.” Id.
Shifting Burden for Breached Non-Compete Agreements
Section 542.335(1)(j) provides in pertinent part that “[t]he violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant …” Once a party establishes by prima facie evidence that the non-compete agreement has been violated, § 542.335(1)(j) shifts the burden to the party opposing enforcement to establish the absence of injury. See DePuy Orthopaedics, Inc., v. Waxman, 95 So.3d at 939; see also, Variable Annuity Life Ins. Co. v. Hausinger, 927 So.2d 243, 245 (Fla. 2d DCA 2006), quoting Am. II Elecs., Inc. v. Smith, 830 So.2d 906, 908 (Fla. 2d DCA 2002).
In DePuy, the First District found that the employer presented a prima facie case that the employee violated the non-compete agreement and failed to rebut the presumption of irreparable injury created by § 542.335(1)(j). DePuy Orthopaedics, Inc., v. Waxman, 95 So.3d at 939. The employer in DePuy presented evidence that the employee breached the non-compete agreement by calling on hospitals and surgeons located in counties covered by the non-compete agreement. Id. Further, the employer presented unrebutted evidence that it was significantly harmed by the employee’s breach in that it experienced a drop in sales with those accounts that were contacted by the employee. Id.
Easier Burden for Enforcing Party
The shifting burdens of proof under § 542.335 reflects a more employer-friendly environment for the enforcement of non-compete agreements. By that, under Fla. Stat. § 542.33, applying to non-competes executed before July 1, 1996, the party enforcing the non-compete agreement was required to establish that it remained in a “like business” in order to carry its initial burden of providing the existence of a legitimate business interest. USI Insurance Services of Florida, Inc., v. Pettineo, 987 So.2d 763, 766 (Fla. 4th DCA 2008), citing Wolf v. James G. Barrie, P.A., 858 So.2d 1083, 1085 (Fla. 2d DCA 2003).
Unlike section 542.33, “[s]ection 542.335 allows an enforcing party to establish prima facie the enforceability of the agreement itself, after which the party opposing enforcement can raise ‘as a defense the fact that the person seeking enforcement no longer continues in business in the area or line of business that is the subject of the action to enforce the restrictive covenant.’” USI Insurance Services, supra., 987 So.2d at 766, quoting Fla. Stat. § 542.335(g)(2). Section 542.335, as Florida’s newest version of a non-compete statute, now places a substantially smaller burden on the party establishing the need for injunctive relief and shifts some of that burden to the defending party. Id. at 766.