United States: A Comparison Of New York And Florida Law Governing Non-Compete Agreements

Introduction

It is not uncommon for a non-compete agreement for an employee located in Florida to be governed by the law of another state.  For example, a senior sales director who is based in Florida may sign a non-compete agreement containing a New York choice of law provision.  The parties drafting the non-compete agreement may select the law of another jurisdiction for a number of reasons, one being that the underlying company is headquartered and more familiar with the laws of another state.  This post will compare Florida law governing non-compete agreements to New York law.  Future posts will make a similar comparison to non-compete laws in major jurisdictions, including Texas, California, Illinois, Delaware and Pennsylvania. 

Florida Law on Non-Compete Agreements

Florida Statute § 542.335 governs non-compete agreements.  Courts interpreting this statute have noted that it provides a "comprehensive framework for analyzing, evaluating and enforcing restrictive covenants contained in employment contracts."  Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223, 1230-31 (11th Cir. 2009), citing Envt'l Servs., Inc. v. Carter, 9 So.3d 1258, 1262 (Fla. 5th DCA 2009). For a court to find that a non-compete agreement is valid under Florida law, the party seeking to enforce the non-compete agreement "shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant."  Proudfoot, 576 F.3d at 1231, citing Fla. Stat. § 542.335(1)(b).  Section (1)(b) of 542.335 sets out a non-exhaustive list of legitimate business interests.  These interests include (1) trade secrets; (2) confidential business information; (3) substantial relationships with existing or prospective customers; (4) customer goodwill; and (5) extraordinary or specialized training.

Besides establishing a legitimate business interest, a party seeking to enforce a restrictive covenant in Florida must also prove that the covenant is reasonable in regards to time, area and line of business.  Proudfoot, 576 F.3d at 1231, citing Fla. Stat. § 542.335(1).  Once the party enforcing the non-compete agreement establishes that the agreement is reasonably necessary to protect the legitimate business interests, the burden shifts to the party opposing enforcement to show that the "contractually specified restraint is overbroad, overlong or otherwise not reasonably necessary to protect the established legitimate business interests." Id. citing Fla. Stat. § 542.335(1)(c). 

New York Law on Non-Compete Agreements

The "starting point" for analyzing non-compete agreements under New York law is the New York Court of Appeals decision in BDO Seidman v. Hirshberg, 93 NY2d 382 (1999).  See TBA Global, LLC v. Proscenium Events, LLC, et al., 2013 NY Slip Op. 30938(U) (Sup. Ct. 2013) at *3.  Under BDO, the Court of Appeals (New York's highest state court) adopted the "modern, prevailing standard of reasonableness for employee agreements not to compete [which] applies a three-part test" to determine whether or not the non-compete agreement is enforceable.  Under BDO, "[a] restraint is reasonable only if it (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public."  TBA at *3, citing BDO Seidman, 93 NY2d at 388-89 (citations omitted).  A violation of any prong of the BDO test renders the non-compete agreement invalid.  Id.

In BDO, the New York Court of Appeals affirmed its prior holding in Reed, Roberts v. Strauman, 40 NY2d 677 (1976), that a non-compete agreement will only survive the first prong of the test where the employee's services are "unique or extraordinary," or where the departing employee uses confidential customer lists or trade secrets.  TBA Global at *3, citing BDO at 389.  Under Reed, Roberts, New York recognizes a common-law rule protecting employers against the misappropriation of trade secrets or confidential customer lists, as well as protecting employers from a competing employee who possesses unique or extraordinary services.  TBA Global at *3 - 4, citing BDO at 389;  see Buhler v. Maloney Consulting, Inc., 299 AD2d (1st Dept. 2002)(holding that a non-compete clause was invalid where the executive recruiter's services were neither extraordinary or unique and there was no unfair competition through the use of confidential information);  see also, TMP Worldwide, Inc. v. Franzio, 269 AD2d 332 (1st Dept. 2000)(finding no irreparable injury where there was no evidence the former employee misappropriated confidential customer lists or trade secrets, nor was there evidence the employee's services were unique or extraordinary).

Comparing Florida and New York Law

Florida and New York law governing non-competes are similar in many respects.  For example, both states seek to protect only "legitimate interests" of the employer so long as enforcement is not harmful to the public good.  In New York, a non-compete is prima facie valid if it is reasonably limited, both in duration and scope, and not unduly burdensome.  See DS Courier Servs., Inc. v. Seebarran, 40 AD3d 271, 271 (1st Dept 2007);  see also, Proudfoot, 576 F.3d at 1231, citing Fla. Stat. § 542.335(1).  One of the more notable differences between New York and Florida non-compete law is Florida's non-compete statute – Fla. Stat. 542.335.  The statute provides tremendous detail as to what a court can and cannot consider when asked to enforce a non-compete agreement.  Whereas New York courts rely on the "modern, prevailing common-law standard of reasonableness for employee agreements not to compete ...," Florida's section 542.335 codifies numerous requirements for an enforceable non-compete agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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