Beverage Trends: Noncompete Agreements Under Florida Law
In the Beverage Trends series, I offer observations about developments in the alcoholic beverage industry nationally and in Florida. In light of the proliferation of noncompete (or noncompetitive) agreements in the craft beer and liquor spaces, it is a good time to examine the relevant Florida law.
Noncompetes are contractual agreements by which a party promises not to compete with a second party’s business in specified manners during an identified time period. In the craft brewery or distillery context, a noncompete agreement would most often be used to bar an employee from working for certain competitors and from soliciting the employer’s customers or employees. These agreements are also used in the context of buying and selling an on-going business. In order to protect the value of the transaction, a buyer may request a noncompete or similar agreement to prevent the seller from damaging the business through competition or interference.
Noncompete agreements are enforceable under Florida Law. Under section 542.335 of the Florida Statutes, noncompetes must be reasonable in time, geographical area, and line of business. The statute places the burden of proving an agreement's reasonableness on the party seeking to enforce it, which will almost certainly be the employer or purchaser. The party seeking to enforce would need to prove the existence of one or more legitimate business interests justifying the restrictive covenant. The statute provides a non-exhaustive list of legitimate business interests, including trade secrets, confidential information, client relationships, and specialized training.
Florida’s noncompete statute has faced criticism for being unbalanced in the favor of the employer. That is because, as written, it is unbalanced in the favor of the employer. It includes a provision that forbids courts from considering harm to the employee in determining the enforceability of the agreement. The law also requires courts to construe such agreements in favor of the employer.
Should a brewer or distiller require their employees to sign noncompetes? Individual management teams must carefully consider this issue and make decisions in light of their specific circumstances.
However, if you do, make sure that your agreement is reasonable.