TIPS FOR DRAFTING RESTRICTIVE COVENANT (SUCH AS NON-COMPETE / ANTI-COMPETITION) LANGUAGE IN EMPLOYMENT AGREEMENT

images-1Parties sometimes seek counsel to enforce a restrictive covenant in an agreement or a provision in an agreement that prohibits the other party from doing something or limiting the use of something. Such provisions are sometimes found in employment agreements to prevent an employee from learning how the employer conducts business, obtaining valuable information such as client contacts and client and pricing lists, and then starting a competing business. The recent decision of Richland Towers, Inc. v. Richland Towers, LLC, 39 Fla. L. Weekly D535b (Fla. 2d DCA 2014), is a new opinion that emphasizes the importance of including the following language in any agreement that contains a restrictive covenant such as an agreement that contains a non-compete / anti-competition provision:

 

Covenants Independent. Each restrictive covenant…set forth in this Agreement shall be construed as a covenant independent of any other covenant or provisions of this Agreement or any other agreement which the Corporation and Employee [parties to the agreement] may have, fully performed and not executory, and the existence of any claim or cause of action by the Employee against the Corporation, whether predicated upon another covenant or provision of the Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of any other covenant.Richland Towers, supra.

 

 

By identifying that each covenant in the agreement is INDEPENDENT instead of dependent on one another, it should prevent the party opposing the restrictive covenant from arguing that the party enforcing the covenant committed a prior material breach of contract and, thus, can no longer enforce the restrictive covenant.  This is a common argument from parties opposing the enforcement of a restrictive covenant such as non-compete language.

 

The above language was in the employment agreement in the dispute. The former employer moved for a temporary injunction to enforce non-compete / anti-competition language in the employment agreement. The trial court denied the injunction finding that because the employer did not pay certain bonuses, the employer committed a prior breach of contract and, thus, the restrictive covenant (non-compete provision) was not enforceable. The Second District, however, reversed the trial court court’s denial of the temporary injunction based on the above quoted language in the agreement. Since one covenant was independent of the other, whether the bonuses were paid would not render the non-compete language unenforceable. So, if drafting a restrictive covenant, having language that clarifies the intent that the covenants in the agreement are independent is important. On the other hand, if agreeing to non-compete language, consider the significance of the provision and the fact that the provision may be deemed independent of any other provision in the agreement.

 

Restrictive covenants are enforced through requesting a temporary injunction. To prevail on a temporary injunction, the moving party must establish: “the threat of irreparable harm to the movant for which there would be no adequate legal remedy, the movant’s substantial likelihood of success on the merits, and a determination that granting the injunction would serve the public interest.” Richland Tower, supra, citing Atomic Tattoos, LLC v. Morgan, 45 So.3d 63, 64-65 (Fla. 2d DCA 2010). Furthermore, if a temporary injunction is ordered, the court should require the moving party to post an injunction bond to cover damages in the event the injunction is determined to have been wrongly ordered. Richland Tower, supra (reversing trial court’s denial of the injunction and holding that if the injunction is ordered, the trial court must require the moving party to provide an injunction bond.)

 

For more on the requirements for temporary injunctions, specifically in the bit protest arena, please see: http://www.floridaconstructionlegalupdates.com/the-difficulty-in-prevailing-in-a-bid-protest/

 

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.

 

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