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Enforceability of Covenants-Not-To-Compete

Optometrists must understand their employment contracts, including any covenants-not-to-compete (sometimes referred to as restrictive covenants or non-competition agreements) contained in such contracts. Although a covenant-not-to-compete serves as a restraint of trade, Florida courts will uphold such a covenant if it is properly written, adequate consideration is given, and it is signed by the optometrist against whom enforcement is sought.

In Florida, the enforceability of a covenant-not-to-compete entered into or having an effective date subsequent to July 1, 1996 is controlled by section 542.335, Florida Statutes. Covenants entered into or having an effective date prior to July 1, 1996 are governed by section 542.33, Florida Statutes. To be valid, the covenant must be ancillary to another agreement [i.e., employment agreement, sale and purchase of practice, sale or purchase of equity interest in practice, etc.] and cannot be used solely for the purpose of restricting competition.

For purposes of this article, only the provisions of section 542.335, Florida Statutes are discussed and only in the context of a covenant in an employment agreement not involving the sale or purchase of the practice or practice assets.

The covenant in an employment agreement must be reasonable in both its geographic scope and its duration to be enforceable. Factors considered by a Florida court in determining the reasonableness of a covenant include the demand for optometric services in the geographic area, the ability of patients to obtain treatment by a similarly qualified optometrist within the geographic area, and the geographic area from which the former employer obtains the majority of his or her patients.

Even if the covenant is found to be reasonable in duration and in geographic area and is supported by adequate consideration, the covenant will not be enforced by the court unless the former employer demonstrates the existence of one or more legitimate business interests justifying the covenant and demonstrates the covenant is reasonably necessary to protect such legitimate business interests. Examples of legitimate business interests that will support a covenant include the former employee’s access to trade secrets, confidential business information, or the former employee’s substantial relationship with prospective or existing patients of the former employer.

In Florida, section 542.335, Florida Statutes creates a rebuttable presumption that any covenant restricting competition for six (6) months or less is reasonable and any covenant restricting competition for more than two (2) years is unreasonable. If the geographic restriction is limited to the surrounding area from which the former employer’s practice draws patients, it will generally be upheld. However, the facts and circumstances of each case are evaluated by the court to determine what is reasonable. When the restrictions are found by the court to be overbroad, overlong, or not reasonably necessary, the court is authorized by section 543.335, Florida Statutes to modify such restrictions to the extent necessary to protect the former employer’s interests.

There are defenses to enforcement of a covenant-not-to-compete other than not being reasonable in time or area. The court can consider any legal or equitable defense available to the former employee such as:

The former employer no longer continues in business in the geographic area;
The former employer no longer continues in the line of business that is the subject of the covenant;
The former employer has not enforced similar covenants against other former employees; and
The former employer breached other material terms of the employment contract.

However, one defense that section 542.335, Florida Statutes, expressly states a court cannot consider is the economic or other hardship that might be caused to the former employee by enforcement of the covenant not to compete.

If the former employer successfully enforces a covenant-not-to-compete, the former employer is entitled to an injunction prohibiting the former employee from continuing to work in violation of the covenant and the former employer may also be entitled to monetary damages and attorneys’ fees.