A year after the Florida Supreme Court issued itsWhite v. Mederi Caretenders Visiting Services of SE. Florida opinion, we find the non-competition landscape shifting on a national level.
Non-competition agreements can benefit employers by providing them with greater assurances that an employee will not divulge or use the company’s resources or confidential information for the benefit of themselves, or a competitor. However, recent nationwide changes to the law, and court rulings, are making it increasingly important for employers to draft narrow and specific non-competition agreements. Enforceability is often a question of state law and varies significantly among different states and business industries.
For example, in Florida, statutes provide a non-exclusive list of legitimate business interests, and case law has recognized other examples. In 2017, the Florida Supreme Court in White v. Mederi Caretenders Visiting Services. of SE. Floridaheld that, when determining whether to recognize a legitimate business interest not enumerated in the statutes, a court must “engage in fact and industry-specific determinations.”The Court concluded that referral sources are a legitimate business interest that warrants protection under the law.This ruling has directly impacted the enforcement of non-competition agreements in Florida. In June 2018, the First District Court of Appeals in Ansaarie v. First Coast Cardiovascular Institute applied the Whiteholding and held that an employer has a legitimate business interests in its relationships with existing patients.This case may signify the types of business interests that courts will deem to be additional legitimate business interests when analyzing the enforceability of non-competition agreements in Florida.
Other states, such as Idaho, Illinois, and Massachusetts, have seen sweeping changes in their laws governing restrictive covenants.
In Idaho, effective July 1, 2018, the legislature reversed a 2016 amendmentthat established a rebuttable presumption of irreparable harm to an employer when an employee violates a non-competition agreement. This reversal removes the rebuttable presumption,courts must now analyze irreparable harm to an employer on a case by case basis.
In Illinois, effective January 1, 2017, the Illinois Freedom to Work Act prohibits non-competition agreements between an employer and any “low-wage employees”, effectively barring non-competition agreements between an employer and any employee who makes $13.00 per hour, or less. Under the Act, these non-competition agreements are illegal and void if they restrict a low-wage employee from performing any work for another employer for a specified period of time or in a specified geographical area, or from performing any work for another employer that is similar to the employee’s work for their current employer.
Perhaps the most significant changes this year are the laws Massachusetts has adopted. On August 10, 2018, Massachusetts enacted the Massachusetts Noncompetition Agreement Act (the “Act”), governing non-competition agreements. The Act is effective for agreements made on or after October 1, 2018.
Under the Act, a non-competition agreement is valid only if it:
1. Is in writing, and both the employer and the employee sign it.
2. Expressly states that the employee may consult with an attorney before signing it.
3. Is provided to the employee by the earlier of either: the formal offer of employment; or at least ten business days before the employment begins, if the employee enters into the non-competition agreement before employment begins.
4. Is supported by fair and reasonable consideration, independent from continued employment, and is provided to the employee at least ten business days before the effective date of the agreement, if the employee enters into the non-competition agreement after employment begins and the non-competition agreement is not in connection with the termination of the employment.
5. Is not broader than necessary to protect the following legitimate interests of the employer: trade secrets; confidential information that is not a trade secret; or the employer’s goodwill.
6. Does not extend for longer than one year from the date the employment ends, or for longer than two years from the date the employment ends if the employee either: breached their fiduciary duty to the employer; or unlawfully took the employer’s property, either physically or electronically.
7. Is reasonable in geographic scope.
8. Is reasonable in the scope of prohibited activities.
9. Is supported by a “garden leave clause”or other express, mutually-agreed upon, consideration for the duration of the restricted period.
10. Is consonant with public policy.
Additionally, under the Actan employer may not enforce a non-competition agreement against any employee who:
1. Is classified as non-exempt under the Fair Labor Standards Act.
2. Is an undergraduate or graduate student participating in an internship or short-term employment.
3. Has been terminated without cause or laid off.
4. Is 18 years old or younger.
Although it is unlikely that Florida will soon change its laws to be as prohibitive as Illinois, or as restrictive as Massachusetts, the high rate of recent nationwide legislative changes coupled with the inconsistent variations from state to state should signal to all employers that vigilance is imperative, because of the disparities that exist, and that non-competition legislation is a hot topic nationwide.
§ 542.335(1)(c), Fla. Stat.
White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 774, 784 (Fla. 2017).
White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 774, 786 (Fla. 2017).
Ansaarie v. First Coast Cardiovascular Inst., P.A., 252 So. 3d 287, 288 (Fla. Dist. Ct. App. 2018).
Idaho Code Section 44-2704.
2018 Idaho Laws Ch. 349 (S.B. 1287).
820 ILCS 90/1 to 90/10.
820 ILCS 90/5, 90/1.
2018 Mass. Legis. Serv. Ch. 228, §§ 21 and 71 (H.B. 4732).
M.G.L. ch. 149, § 24L(b).
A garden leave clause is a clause in which an employer requests that an employee stay out of the office after the employee resigns or is terminated, but the employee temporarily remains on the payroll.
M.G.L. ch. 149, § 24L(c).
29 U.S.C.§§ 210 to 219.