Florida Statute § 542.335(1)(d)(1) through (3) spells out different time periods where a non-compete agreement is deemed reasonable. For example, section 542.335(1)(d)(1) provides that when a non-compete is sought to be enforced against a former employee or independent contractor, "a court shall presume unreasonable in time any restraint more than 2 years in duration." As for trade secrets, section 542.335(1)(e) provides that a court shall presume reasonable in time any non-compete agreement with a duration of 5 years or less. The statute further provides that "[a]ll such presumptions shall be rebuttable presumptions."
Recently, the Appellate Division of the Superior Court of New Jersey issued a decision addressing when a trade secret or other protectable interest under a non-compete agreement may become obsolete and therefore not subject to protection by the court. See Truong, LLC v. Tran, No. A-5752-11T1 (N.J. Super. Ct. App. Div. Jan. 9, 2013). Truong involved the enforcement of a non-compete agreement between the owner of a nail salon and his former employees. The non-compete agreement contained a two year duration which the employer sought to enforce once one of the employees opened a competing salon. The trial court granted an injunction enforcing the non-compete and the employees appealed. Truong at *6.
New Jersey law governing non-competes is similar in some respects to Florida's non-compete statute. In order for a non-compete agreement to be "reasonable" and subject to enforcement, the non-compete must protect the legitimate interests of the employer, impose no undue hardship on the employee and not harm the public. Truong at *8, citing Solari Indus., Inc. v. Malady, 55 N.J. 571,576 (1970). However, in considering whether to enforce the non-compete agreement, the Troung court recognized that it "may also consider the relevant lifespan of a trade secret or other protectable information." Truong at 9. The court noted that a non-compete agreement "may not extend beyond the temporal point when the secret information has become obsolete." Id., citing Earthweb, Inc. v. Schlack, 71 F.Supp. 2d 299, 313 (S.D.N.Y. 1999)(holding that a one-year restrictive covenant was too long given the "dynamic nature" of an online services business in which information can quickly lose its value).
In reversing the trial court, the Truong court found that the employer provided insufficient proof that a duration longer than eight months was reasonable. Id. at 10. When enforcing a non-compete agreement to protect customer lists, "the court should consider what percentage of the employer's customers persist after the contractual time period." Id. If only a small amount of customers persist after the time period of the non-compete, the non-compete agreement "may unreasonably bar competition to protect an obsolete list." Id. According to the appellate court, the employer in Truong failed to provide evidence of the time it would take for a new employee to solidify relationships with customers. Id. The court refused to uphold the injunction, in part, because of the lack of evidence of "how long it would take for [the employer's] customer list to become stale." Id.
Truong demonstrates how customer lists, which are normally a protectable business interest, can nevertheless be protected under a non-compete because the information became stale. Although it is a New Jersey decision, Truong could have relevance in an action to enforce a Florida non-compete agreement. Even though Florida's non-compete statute provides a framework for the reasonable duration of different types of non-compete agreements, section 542.335(1)(e)'s time periods are rebuttable presumptions. If a party can show that the legitimate business interest is not worth protecting because the information has become stale or obsolete, the party opposing enforcement of the non-compete agreement may be able to successfully challenge enforcement.
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