Tag Archives: non-compete agreement

OBTAINING TEMPORARY INJUNCTION TO ENFORCE NON-COMPETE AGREEMENT

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When a party breaches a non-compete agreement (with a non-solicitation clause), the non-breaching party typically moves for a temporary injunction.   The breaching party is the party that signed the non-compete agreement, such as a former employee or consultant that agreed not to solicit its employer’s customer lists or referral sources upon leaving.  The non-breaching party or the party moving for the temporary injunction is the party that is looking to protect its trade secret customer lists or referral sources, such as the employer. 

 

 

“In order to obtain a temporary injunction…[the non-breaching party is] required to establish (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 the injunction will serve the public interest.”  Smart Pharmacy, Inc. v. Viccari, 41 Fla. L. Weekly D1274a (Fla. 1st DCA 2016).  Again, a party moving to enforce a non-compete agreement will and should move for a temporary injunction. 

 

In the recent case, Smart Pharmacy, an employer regarded its referral sources to be confidential trade secrets. The employer had its employee sign a non-compete agreement that precluded the employee from competing against its employer in a certain geographic area for two years upon the employee’s departure from the employer.  The non-compete agreement prevented the employee from soliciting its employer’s referral sources upon leaving (a non-solicitation clause).  The employee left and started soliciting the referral sources in violation of the non-compete agreement.  The employer sued the employee and the employee’s new employer and moved for a temporary injunction preventing them from soliciting the referral sources.   

In analyzing the four temporary injunction factors set forth above:

 

(1) Likelihood of Irreparable Harm

 

The violation of a non-compete agreement creates the presumption of likelihood of irreparable harm.  Thus, this factor is established.

 

(2) Inadequate Remedy of Law

 

An employer has an inadequate remedy at law for the irreparable harm because money damages in this context are difficult to prove with a reasonable degree of certainty and would not fully compensate the employer for a violation of a non-compete agreement. Thus, this factor is established. 

 

(3) Substantial Likelihood of Success

 

Soliciting customers of a business is a legitimate business interest.  An employee breaches a non-compete agreement that contains a non-solicitation clause when the employee solicits the customers or sources of his or her former employer, meaning the employer has a substantial likelihood of success. Thus, this factor is established. 

 

(4) Injunction will Serve the Public’s Interest

 

An injunction will serve the public’s interest since it would protect an employer’s legitimate business interest in protecting its customer lists and referral sources. Thus, this factor is established.

 

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.

 

REFERRAL SOURCES CAN CONSTITUTE LEGITIMATE BUSINESS INTEREST TO SUPPORT NON-COMPETE AGREEMENT

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I previously discussed the validity of non-compete agreements as well as tips for drafting such agreements.

Recently, in Infinity Home Care, L.L.C. v. Amedisys Holding, LLC, 40 Fla.L.Weekly D1929a (Fla. 4th DCA 2015), the Fourth District Court of Appeal discussed the requirement of a “legitimate business interest” pursuant to Florida Statute s. 542.335, which governs the enforcement of non-compete agreements. Specifically, the court was looking at whether referral sources constitute a legitimate business interest.  The reason being is that there needs to be a legitimate business interest to enforce a restrictive covenant such as a non-compete agreement.  The statute gives examples of legitimate business interests (e.g., trade secrets, confidential business information that does not qualify as trade secrets, substantial relationships with specific prospective or existing customers, patients or clients, etc.) but is NOT limited to the criteria or examples set forth in the statute.  See Fla.Stat. 542.335(1)(b) (“the term ‘legitimate business interest’ includes, but is not limited to:…”).

 

As it pertains to what constitutes a legitimate business interest, the Fourth District held:

 

Section 542.335, however, clearly states that the legitimate business interests listed in the statute are not exclusive. This allows the court to examine the particular business plans, strategies, and relationships of a company in determining whether they qualify as a business interest worthy of protection.

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In sum, we hold that referral sources are a protectable legitimate business interest under section 542.335, Florida Statutes.

Infinity Home Care, supra.

 

If you are drafting or enforcing a non-compete agreement, it is important to consult with counsel.  This way your legitimate business interests can appropriately be protected as you move to enforce the non-compete agreement—the restrictive covenant—by moving for injunctive relief.  This case, however, supports the argument that the legitimate business is broader than the criteria and examples in the statute and based on the business’s “plans, strategies, and relationships.” 

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.