The Biden Administration and several states have sought to limit non-compete agreements in recent years as restraints on trade. Florida has long been more accepting of them and has just moved further into this camp. The Florida Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act, House Bill (HB) 1219, recently became law when Gov. Ron DeSantis declined to sign or veto the legislation. The law allows corporations with their principal place of business in Florida, regardless of the location of their employees or contractors, to enter into so-called "garden leave agreements" and a new category of enhanced non-compete agreements with consenting well-paid employees or contractors other than healthcare practitioners, and clarifies that none of this constitutes an unlawful restraint on trade if certain conditions are met.
Garden Leave Agreement
A "covered garden leave agreement" is defined as "a written agreement, or part of a written agreement, between a covered employee and covered employer in which: (a) The covered employee and covered employer agree to up to, but no more than, 4 years of advance, express notice before terminating the employment or contractor relationship; (b) The covered employee agrees not to resign before the end of such notice period; and (c) The covered employer agrees to retain the covered employee for the duration of such notice period and to continue paying the covered employee the same salary and providing the same benefits that the covered employee received from the covered employer in the last month before the commencement of the notice period."
Companies eligible to enter into a garden leave agreement as "covered employers" employ or engage a "covered employee," who is an employee or individual contractor who earns or is reasonably expected to earn a salary greater than twice the annual mean wage of the county in Florida in which the covered employer has its principal place of business, or the county in Florida in which the employee resides if the covered employer's principal place of business is not in Florida. The employee or contractor may not be a person classified as a healthcare practitioner.
Non-Compete Agreement
Companies employing these same type of employees or contractors may enter into a "covered noncompete agreement" or "written agreement, or a portion of a written agreement … in which, for a period not to exceed 4 years and within the geographic area defined in the agreement, the covered employee agrees not to assume a role with or for another business, entity, or individual: (a) In which the covered employee would provide services similar to the services provided to the covered employer during the 3 years preceding the noncompete period; or (b) In which it is reasonably likely the covered employee would use the confidential information or customer relationships of the covered employer."
Other Key Provisions
The new law provides a specific procedure for an employer that would enter into one of these agreements with an eligible employee as follows: The employer must provide the proposed agreement to: 1) a prospective covered employee at least seven days before an offer of employment expires or 2) a current covered employee at least seven days before the date that an offer to enter into a covered garden leave agreement expires.
A court must preliminary enjoin violation of a covered garden leave agreement and covered non-compete agreement unless an employee or contractor can prove by clear and convincing evidence, based on nonconfidential information, that 1) the covered employee will not perform, during the notice period, any work similar to the services provided to the covered employer during the three-year period preceding the commencement of the notice period, or use confidential information or customer relationships of the covered employer, or 2) the covered employer has failed to pay or provide the salary and benefits provided for in the covered garden leave agreement during the notice period and has had a reasonable opportunity to cure the failure.
Preliminary injunctive relief is also available against an entity engaging the covered employee unless clear and convincing evidence supports 1) the first exception above or 2) the business establishes that it is not engaged in, and is not planning, any business activity similar to that engaged in by the covered employer during the notice period. This second exemption is also a basis for injunctive relief against a covered employee's violation of a covered non-compete agreement. The covered employer is not limited to injunctive relief.
Neither type of agreement may be treated as a restraint on trade under the terms of the new statutes as long as certain conditions are met, such as that the covered employee was advised, in writing, of the right to seek counsel before execution of the agreement; the covered employee acknowledges, in writing, receipt of confidential information or customer relationships; and the agreement includes certain terms.
The statutes apply in the event that a covered employee maintains a primary place of work in Florida, regardless of any applicable choice of law provisions, or the covered employer's principal place of business is in the state and the agreement expressly states that it is governed by Florida law. The statute purports to trump any other law in conflict with it.
Florida employers will want to consider whether a covered garden leave agreement or covered non-compete agreement is advantageous.
