Courts will construe non-compete/non-solicitation agreements in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement of such agreement. Such an interpretation of a non-compete/non-solicitation agreement by a court was demonstrated in the case of Anarkali Boutique, Inc. v. Ortiz, 2012 WL 6163181 (Fla. 4th DCA 2012).
In Anarkali Boutique, Inc. v. Ortiz, 2012 WL 6163181 (Fla. 4th DCA 2012), a Company hired a worker in 2008. The worker signed a non-compete/non-solicitation agreement (“non-compete agreement”), which stated in pertinent part:
“. . . I will not, either during my employment by the Company or for a period of two (2) years after I am no longer employed by Company, engage, as an employee, independent contractor, officer, director . . . in any employment, business, or activity that in any way competes with the business of the Company within a one-hundred (100) mile radius of any store, office, or facility of the Company . . . Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement. . . .”
While the worker was being trained by the Company she was paid a salary. In 2009, after the worker built her own clientele, the Company began treating her as an independent contractor whereby her compensation package changed. In 2011, the worker left the Company and opened her own business, where she performed the same services she performed for the Company, at a location less than five miles from the Company’s location.
Consequently, the Company filed a complaint for breach of the non-compete agreement, and a motion for temporary injunction against the worker arguing that the worker violated the non-compete agreement, and that the Company’s legitimate business interests justified the agreement’s restrictive covenants, which were necessary to protect the Company’s interests. In opposition, the worker argued that when the Company changed her status to an independent contractor she ceased being an employee under the non-compete agreement, the two-year non-compete period began to run at the time her status changed, and therefore the two-year period expired before she left to start her own business. The circuit court agreed with the worker and denied the Company’s motion for temporary injunction. The Company appealed the lower court’s decision.
Pursuant to applicable Florida Statutes, a court shall construe a non-compete agreement in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement of the agreement, and shall not construe such agreement narrowly, against the restraint.
On appeal, the appellate Court agreed with the Company, determining that the lower court did not give effect to the non-compete agreement’s provision providing that “any subsequent change . . . in my duties, salary or compensation will not affect the validity or scope of the agreement.” The appellate court held that pursuant to the language of the Agreement, the mere changing of the worker’s status from an employee to an independent contractor did not cause the two-year non-compete period to begin to run – but that the two-years began to run when the worker left the Company.
In support of its holding, the Court reasoned that the obvious purpose of the non-compete agreement was to preclude the worker from competing with the Company after the Company trained the worker and allowed her to build her own clientele. The Court explained that it would be unreasonable to construe the agreement as having the two-year non-compete period to begin running while the Company was still employing the worker as an independent contractor, who was not competing with the Company. Accordingly, the Court reversed the lower’s court’s decision denying the Company’s Motion for Temporary Injunction.
This case demonstrates that Courts will construe non-compete/non-solicitation agreements in favor of a Company, if the Company can prove the existence of legitimate business interests justifying such agreement, and if the agreement is reasonably necessary to protect the Company’s legitimate business interests.
About the Author: Richard E. Guttentag is a partner with Stearns, Roberts & Guttentag, L.L.C., and is Board Certified in Construction Law by the Florida Bar. Mr. Guttentag exclusively in construction law including construction lien claims and defense, payment and performance bond claims and defense, bid protests, construction contract preparation and negotiation, and construction and design defect claims and defense. He can be reached for consultation at [email protected].