Photo:Shutterstock/Piotr Swat
Employment and Labor

Florida Still Strongly Favors Employer’s Non-Compete Agreements 

Florida Still Strongly Favors Employer’s Non-Compete Agreements 

Non-compete and confidentiality clauses have long been a fixture in employment agreements in Florida. However, there has been some dissention as to whether such restrictive covenants continue to apply where an employment agreement for a specific term expires and is not renewed, but the employee continues to be employed on an at-will basis.

In a recent opinion, the Third District Court of Appeals rejected an employee’s argument that the non-compete provision of his employment agreement did not apply after he was terminated where the term of his employment agreement had already expired. The appellate court clarified that because the employment agreement contained express language showing that the parties intended for the non-compete provision to survive the expiration or termination of the agreement, the provision remained effective, even where the agreement expired but the employment relationship continued.

Third District: Alonso-Llamzares v. International Dermatology Research, Inc.

This lawsuit concerned the enforceability of a non-compete provision after the term of an employment contract expired. International Dermatology Research Inc. (“Employer” or “ICR”) was a medical practice management business that used dermatologists to conduct clinical research projects in the area of dermatology. In October 2011, ICR hired Dr. Alonso (“Employee.”) As a condition of employment, ICR and Dr. Alonso entered into an employment agreement (“Agreement”), wherein ICR agreed to provide certain management services to Dr. Alonso’s medical practice and Dr. Alonso agreed to conduct clinical research projects for ICR.

Unless terminated earlier by one of the parties, the Agreement defined the “term” of engagement under the Agreement as a period of two years. The Agreement also contained standard restrictive covenants, including non-compete and confidentiality provisions. Per the non-compete provision, Dr. Alonso agreed not to compete with ICR within a five-mile radius of ICR’s premises “during the Term of this Agreement and thereafter for a period of two (2) years from the date of expiration or termination of the term of this Agreement.” Importantly, the Agreement also contained a survival provision which expressly stated that the restrictive covenants “shall survive the expiration or termination of this Agreement.”

In October 2013, the term of the Agreement expired. The parties continued their employment relationship without renewing the Agreement. Four years later, the parties executed an amendment to the Agreement, providing a new term under the Agreement which was set to expire on December 31, 2017. The amendment also stated all other aspects of the Agreement remained in effect, including the restrictive covenant provisions.

After the Agreement expired on December 31, 2017, Dr. Alonso continued to work for ICR on an at-will basis. In November 2019, ICR terminated Dr. Alonso. Two months later, Dr. Alonso began operating Driven Research LLC, an operation he admitted was in direct competition with ICR. Accordingly, ICR sued Dr. Alonso for breach of contract, specifically the non-compete provision of the Agreement, and sought a temporary injunction enforcing the parties’ non-compete agreement. ICR sought to prevent Dr. Alonso from (1) working with Driven Research; (2) competing with ICR for two years; and (3) being involved in clinical research or trials relating to dermatological products or procedures for two years within a five-mile radius of Employer’s business.

The trial court granted the temporary injunction and Dr. Alonso appealed. The appellate court agreed with the trial court, finding (1) that the non-compete provision was in effect when Dr. Alonso began working for Driven Research and (2) that the non-compete restrictive covenant was valid and enforceable. However, the appellate court concluded the injunction was deficient as it lacked sufficient detail describing the acts restrained by the employee.

Non-Compete Provision Survived Expiration of Employment Agreement 

The employee argued that the non-compete provision expired before he began working for Driven Research because the Agreement expired on December 31, 2017, and thus the non-compete provision ended on December 31, 2019, two years from the date of expiration of the Term of his Agreement. The appellate court rejected this argument. Because the Agreement contained express language showing that the parties intended for the non-compete provision to survive the expiration or termination of the Agreement, the provision remained effective where the Agreement expired but Dr. Alonso’s employment relationship continued. Thus, the non-compete provision survived the December 31, 2017, expiration and was triggered upon IDR’s termination of Dr. Alonso’s employment on November 19, 2019.

Non-Compete Provision Was Valid and Enforceable

To be an enforceable restrictive covenant, such as a non-compete provision, the employer must have a legitimate business interest and show the restriction is necessary to protect its business interests. The appellate court opined that ICR demonstrated a legitimate business interest in its substantial relationships with existing customers regardless of whether Dr. Alonso had access to the to the patient database where Dr. Alonso mailed a letter to ICR’s client requesting work. In Florida, courts must construe restrictive covenants in favor of protecting the employer’s business interest. As such, the appellate court rejected Dr. Alonso’s argument that ICR had to present evidence of a particular, identifiable existing customer with which it has a substantial relationship.

Requirements for Temporary Injunction Satisfied

In Florida, a non-compete agreement can be enforced through a temporary injunction. To obtain a temporary injunction enforcing a non-compete agreement, employers must prove (1) a substantial likelihood of success on the merits in its underlying breach of contract claim; (2) the unavailability of an adequate remedy at law; (3) irreparable harm absent entry of an injunction; and (4) the injunction would serve the public interest. The appellate court affirmed, without discussion, not only the trial court’s finding that ICR satisfied the elements of a temporary injunction but also that Dr. Alonso was unable to overcome the presumption that his violation of the non-compete agreement created and would continue to create irreparable injury to ICR. 

Injunction Shall Describe in Reasonable Detail the Acts Restrained

However, the appellate court found that the injunction itself was facially deficient because it failed to describe in reasonable detail the act or acts Dr. Alonso was prevented from doing. For an injunction to be valid, it must expressly state the activity the employee is prevented from performing without reference to any other document. Vague language enjoining the employee from “competing against the employer” or from “violating the non-compete agreement” is insufficient.

What do Employers Need to Do Now?

To ensure non-compete and confidentiality provisions in employment agreements are enforceable after an employee’s separation, employers should be certain their employment agreement include a “survival” provision that clearly states the restrictive covenants survive the expiration or termination of the agreement. This ensures that non-compete and confidentiality provisions remain effective even if the employee remains employed in the absence of a written agreement and thus, following their resignation or termination, the employee would still be bound by the restrictive covenants. 

Although not necessary, it is advisable that companies audit existing agreements to see whether their employment agreements contemplate a situation wherein an employee remains an employee in the absence of a written agreement. Likewise, employers should be certain that new employee agreements expressly provide survivor provisions for restrictive covenants.

Finally, employers seeking temporary injunctions should ensure that the injunction itself describes in reasonable detail the act, acts, or activity it seeks to have restrained.

A reading of the Third District Court of Appeal’s decision in Javier Alonso-Llamazares, M.D., v. International Dermatology Research, Inc., etc., offers an example of enforceable non-compete, confidentiality, and survival language to use.