Enforcement of Non-Compete and Non-Solicitation Provision

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Enforcement of Non-Compete and Non-Solicitation Provision

Non-compete provisions are not always fair.  The same can probably be said about non-solicitation provisions.  Typically, these provisions (referred to as restrictive covenants) are included in an employment agreement as a condition of employment.  But, if there is a legitimate business interest for these provisions, and they are limited in scope, they are enforceable and relief, including injunctive relief, can be sought.   

Restrictive covenants in employment-related agreements, such as a non-compete and non-solicitation provision, are governed by Florida Statute s. 542.335

A party (e.g., employer) seeking a temporary injunction against another (e.g., employee) must demonstrate four elements: “(1) the likelihood of irreparable harm; (2) the unavailability of an adequate remedy at law; (3) a substantial likelihood of success on the merits; and (4) that a temporary injunction will serve the public interest.”  Picture It Sold Photography, LLC v. Bunkelman, 45 Fla. L. Weekly D74a (Fla. 4th DCA 2020).(citation omitted).

An example of an employer moving to enforce such restrictive covenants can be found in Bunkelman.  

The employer in this case provides photo and video services to the real estate industry (probably for listing purposes).  The employer hired an independent contractor and an independent contractor agreement was executed that included a non-compete and non-solicitation provision:

Independent Contractor agrees that he/she will not directly or indirectly do or attempt to do any of the following during Independent Contractor’s engagement (except in the faithful performance of his/her duties for the Company) or during the period of two years after the date of termination of Company’s engagement of Independent Contractor, within the Florida counties of Palm Beach, Broward, Martin and St. Luciesolicit, employ, engage, hire, call oncompete for, sell to, divert, or take away any customer, supplier, endorser, advertiser or employee, agent, subagent, or independent contractor of Company or aid, assist or plan for anyone else to do so; divert or aid, assist or plan for others to divert from the Company any past or pending sale or exchange of any goods, product or service; entice, aid or cooperate with others in soliciting or enticing any employee, agent, subagent or independent contractor of the Company to leave, modify or terminate its relationship with the Company; participate in planning for any new or existing business that is or would be similar to the business of the Company or that does or would compete with the Company or solicit customers of the Company; accept any other employment or engagement that would call upon Independent Contractor to use, disclose or base judgments on the Company’s trade secrets or confidential information or to utilize the Company’s customer goodwill in making sales or other advantageous business relations for a business similar to or in competition with the Company’s business; compete against the Company for customers, suppliers, employees, agents or independent contractors; or own, manage, be employed by, be engaged by, work for, consult for, be an officer, director, partner, manager, employee, independent contractor or agent of, advise, represent, engage in, or carry on any business which is similar to the type of business engaged in by the Company at this time or on the date of termination of Independent Contractor’s engagement and which competes with the Company.

The independent contractor violated the agreement and solicited and worked for the employer’s customers.  In doing so, the independent contractor, without terminating the agreement, just stopped working for the employer and competed with the employer in the prohibitive areas set forth in the agreement.

The employer filed a lawsuit against the independent contractor for injunctive relief—to force the independent contractor to honor the agreement–and monetary damages.  

An evidentiary hearing was held in furtherance of a temporary injunction in favor of the employer.  The independent contractor testified he felt he was fraudulently induced into entering the agreement because he was promised he would make a certain amount of money and work predominantly in a certain location, neither of which panned out.  He testified that he provided and still provides services to the employer’s customers but introduced testimony from some of the employer’s former customers that said they would never use the employer again for reasons unrelated to the independent contractor. 

The trial court found that there was a legitimate business interest for the restrictive covenants and they were limited in scope (location) but denied the temporary injunction finding that the employer failed to establish it had an adequate remedy at law—element (2).  The trial court further found that the independent contractor’s fraudulent inducement defense had some traction and, therefore, seemed to find that the employer cannot prove a substantial likelihood of success on the merits—element (3).

The appellate court reversed and remanded to the trial court to enter a temporary injunction in favor of the employer.

As it pertained to element (2)—the unavailability of an adequate remedy at law—“[T]he continued breach of a non-compete agreement threatens a former employer’s ‘goodwill and relationships with its customers, and nothing short of an injunction would prevent this loss.’”  Bunkelman, supra (citation omitted).  The evidence established that the independent contractor continued to compete against the employer in violation of his agreement and still does work for and solicits customers he obtained from the employer.

As it pertained to element (3)—substantial likelihood of success on the merits—“Evidence that an enforceable covenant not to compete was breached will support a trial court’s finding of the likelihood of success on the merits.”  Bunkelman, supra (citation omitted).   The trial court was right to consider the independent contractor’s fraudulent inducement affirmative defense.  If there is evidence that the employer breached the agreement, the employer needs to establish it has a substantial likelihood of sucess on the merits of the defense.

In this case, there was no provision in the independent contractor agreement as to the independent contractor earning a particular salary or amount.  Rather, there was a fee schedule and the independent contractor testified he was paid by that fee schedule. Further, there was nothing in the agreement that promised the independent contractor that he would work predominantly in a certain geographic location.  The agreement stated it was the entire agreement between the parties. Thus, even if the independent contractor was promised something orally pre-contract, “a party cannot recover in fraud for oral misrepresentations that are later contradicted in a written contract.”  Bunkelman, supra.    (Finally, the independent contractor did not put on evidence to establish any justifiable reliance on the alleged salary and location misrepresentations to support the defense of fraudulent inducement).

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

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