Florida allows enforcement of contracts and contractual provisions which restrict and/or prohibit competition. However, in order to be enforceable, such contracts must (1) be in writing, (2) signed by the individual against who enforcement is sought and (3) reasonable in time, area, and line of business. In addition, an employer seeking to enforce a restrictive covenant must be able to identify a “legitimate business interest” for protection, including but not limited to:
1. Trade secrets;
2. Valuable confidential business or professional information;
3. Substantial relationships with specific prospective or existing customers/patients/clients;
4. Customer/patient/client goodwill associated with:
a. An ongoing business or professional practice, using a trademark, service mark, or “trade dress”;
b. A specific geographic location; or
c. A specific marketing or trade area.
5. Extraordinary or specialized training.
Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.
Issue of Reasonableness of Restrictions on Competition
Legal matters regarding the enforcement of contracts and contractual provisions which restrict and/or prohibit competition often focus on the issues of whether restriction is reasonable in time, area, and line of business. If a restriction is overbroad, overlong, or otherwise not reasonably necessary to protect the legitimate business interest or interests, a court can modify the restriction.
Florida law sets forth certain rebuttal presumptions regarding the reasonableness on the length of a restriction on competition for a former employee/agent/independent contractor of an employer; a former distributor, dealer, franchisee, or licensee of a trademark or service mark; and the seller of all or a part of the assets of a business or professional practice/shares of a corporation/partnership or LLC or other equity interest in a business or professional practice and for post-termination restrictive covenant predicated upon the protection of trade secrets. Despite these presumptions of reasonableness, the reasonableness of a contract restricting and/or prohibiting competition is determined on a case-by-case basis.
Enforcement and Attorney’s Fees
The courts have the power to enforce a contract which restricts and/or prohibits competition by any appropriate and effective remedy, including, temporary and permanent injunctions. In certain circumstances, restrictive covenants can be enforced by third-party beneficiaries of such contract or an assignee or successor to a party to such contract.
Additionally, a court may award attorney’s fees and costs to the prevailing party in any action seeking enforcement of, or challenging the enforceability of, a contract which restricts and/or prohibits competition.
Please remember that this overview is being provided for informational purposes only and it is not a complete summary of the law. Thus, it is not intended to and should not be relied upon as legal advice. If you have any questions relative to this overview or other questions regarding restrictive covenants, you should contact an attorney. To speak with an attorney at Creed & Hall, please contact our office at (813) 444-4332.