Florida Statutes section 542.335(1) sets forth the parameters for enforcement of a non-compete agreement in Florida. Supinski v. Omni Healthcare, P.A., 853 So.2d 526, 529-30 (Fla. 5th DCA 2003). If the non-compete agreement satisfies the requirements of section 542.335, the non-compete agreement "may be enforced by the injunctive powers of the court." Id. at 530. Florida Statute section 542.335(1)(g)(3) requires a trial court to consider all "pertinent legal and equitable defenses" available to a party defending against a non-compete agreement. See e.g., Leighton v. First Universal Lending, LLC, 925 So.2d 462, 464 (Fla. 4th DCA 2006). This post looks at when an employer’s breach of the non-compete agreement serves as a defense to its enforcement.
Requirements for Injunctive Relief
Florida courts generally recognize that in order for a party to receive injunctive relief to protect against the breach of another party, the party seeking the injunction must have performed its obligations under the contract. Bradley v. Health Coalition, Inc., 687 So.2d 329, 333 (Fla. 3rd DCA), citing Seaboard Oil Co. v. Donovan, 99 Fla. 1296, 1305 (recognizing that "[a] party is not entitled to enjoin the breach of a contract by another, unless he himself has performed what the contract requires of him so far as possible; if he himself is in default or has given cause for nonperformance by defendant, he has no standing in equity.") In the context of non-compete litigation, courts consider an employer’s breach of an employment agreement when deciding whether the employer is entitled to an injunction to enforce a non-compete provision. Cordis Corp. v. Prooslin, 482 So.2d 486, 490 (Fla. 3rd DCA 1986), citing Channell v. Applied Research, Inc., 472 So.2d 1260, 1262 (Fla. 4th DCA 1985).
Employer’s Breach as a Defense
Under Fla. Stat. § 542.335, a court must consider all legal and equitable defenses, including whether the employer breached the agreement. Leighton v. First Universal Lending, LLC, 925 So.2d 462, 464 (Fla. 4th DCA 2006), citing Benemerito & Flores, M.D.’s, P.A. v. Roche, 751 So.2d 91, 93 (Fla. 4th DCA 1999). In order for an employee to prevail using the employer’s breach as a defense, the employee must offer evidence of the employer’s breach. Id. at 464.
Employers often seek to enforce a non-compete agreement by seeking a temporary injunction enforcing the terms of the agreement against the employee. If the employee can establish that the employer breached the agreement, the employee may convince the court that the employer has not established a likelihood of success on the merits and therefore a temporary injunction is not warranted. See Lotenfoe v. Pahk, M.D., 747 So.2d 422, 425 (Fla. 2nd DCA 1999)(finding employer was unlikely to succeed on the merits as evidence suggested the employer may have failed to negotiate in good faith). In Bradley v. Health Coalition, 687 So.2d 329, 333 (Fla. 3rd DCA 1997), the Third District Court of Appeals reversed a temporary injunction granted to the employer and ordered the trial court to consider whether the employer (who sought the injunction) breached the employment contract by failing to adequately compensate the employee. According to the court in Bradley, "[i]f the employer wrongfully refuses to pay the employee his compensation, the employee is relieved of any further obligation under the contract and the employer cannot obtain an injunction." Id. at 333. (Emphasis added).
Limitations on the Breach Defense
An employer’s breach is not an automatic defense to enforcement of a non-compete agreement. Some courts have limited the defense to "dependant covenants," versus independent covenants. See Reliance Wholesale v. Godfrey, 51 So.3d 561, 565 (Fla. 3rd DCA 2010). In Reliance Wholesale, the Third District Court of Appeals reversed a trial court finding that the employer had breached the employment agreement. Id. According to the Third District, covenants within the employment agreement were independent, not dependent covenants, and therefore the employer’s prior breach of the agreement was not a viable defense to the issuance of an injunction. Id.
In order to understand the distinction between dependent and independent covenants, it helps to look at the language of the employment agreement at the center of the dispute in Reliance Wholesale. The agreement in Reliance contained the following provision:
The covenants set forth herein shall be construed as agreements independent of any other provision in any other agreement by, between, among, or affecting Reliance Medical Wholesale, Inc., and Employee, and the existence of any claim or cause of action by Employee against Reliance Medical Wholesale, Inc., whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement of this Agreement. Id.
The non-compete agreement in Reliance Wholesale specifically provided that the covenants "shall be construed as agreements independent of any other provision in any other agreement." The language in the agreement clearly makes each provision independent of the other. Under such language, if an employer breaches one covenant, that breach is independent of other provisions and therefore not a defense to enforcement.