Understanding Restrictive Covenants In Florida Employment Agreements
Employment is generally considered “at-will” in Florida, meaning either the employer or the employee can walk away from the relationship at any point without further restrictions. But many employers find it beneficial to sign formal employment agreements with key employees. One reason for this is that Florida law permits such agreements to contain restrictive covenants. For example, a contract may provide an employee agrees not to work for a competitor for a certain period of time after leaving the company. The employee may also agree not to use certain trade secrets or other valuable confidential business information to undermine the employer’s legitimate interests.
Appeals Court: Florida Law Only Protects Confidential Information Regarding “Specific” Customers
While Florida law does provide broad enforcement and recognition of these types of restrictive covenants, there are limits. A recent decision from the U.S. 11th Circuit Court of Appeals, Vital Pharmaceuticals v. Alfieri, provides a good case study on this point. In this case, an employer sued four former employees seeking to enforce various restrictive covenants in their respective employment agreements.
The employer in this case, Vital Pharmaceuticals, produces energy-drink products. The four former employees worked in management roles for the company. They all signed employment agreements that provided (1) they would not work for a competing company for at least one year after leaving Vital; (2) they would not solicit any Vital employees to join a competing company, also for at least one year; and (3) they agreed to never disclose or utilize for their benefit any “confidential information” belonging to Vital, including its “marketing and sales information.”
At some point, all four employees left Vital and within one year joined another company, Elegance Brands, Inc. Although Elegance’s primary business was selling alcohol, it had also started marketing its own line of energy drinks. Vital thus sued the four ex-employees, alleging they had violated the restrictive covenants in their employment agreements.
By the time the case reached the 11th Circuit, much of the lawsuit was moot, as the four ex-employees were by then no longer working for Elegance either. But the appellate court did address the ongoing application of the restrictive covenant with respect to confidential information, which did not expire after one year. The trial court had granted Vital a preliminary injunction to enforce this covenant against one of the ex-employees, who was ordered not to solicit any of Vital’s current or prospective energy drink customers where she had “confidential and proprietary information.” The 11th Circuit, however, said Vital never established a “legitimate business interest in its customer relationships,” which is necessary under Florida law governing non-compete agreements.
Essentially, the appellate court said that the employer has to show they have a legitimate business interest in a “substantial” relationship with “specific” customers or potential customers. Here, Vital failed to name any specific customers. It simply claimed a broad interest in protecting any and all possible customer relationships. The 11th Circuit said that was too broad under Florida law.
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Business owners always need to be proactive when it comes to protecting their legal interests. An experienced Brandenton business litigation lawyer can provide you with invaluable advice and representation. Contact Suncoast Civil Law today to schedule a consultation with a member of our team.