Independent Contractors and Non-Compete Clauses

Non-compete agreements are contractual in nature.  For that reason, non-compete litigation tends to be fact specific and language specific.  A recent Florida case, Anarkali Boutique, Inc., v Ortiz, 104 So. 3d 1202 (Fla. 4th DCA 2012), held that the two-year non-compete period did not begin to run on the date the employee became an independent contractor of the same company that employed her.  Rather, the Court held, the restrictive covenant did not begin to run until after the independent contractor severed her relationship with the company.   The former employee wanted to construe the non-compete in a way that would allow here to directly compete with her former employer as soon as possible.  As a result, she sought to use the change in employment status from employee to independent contractor as the date when the non-compete period commenced.  After her former employer learned that she was directly competing with it within the 2-year period, the business sought an injunction to stop her from violating the non-compete.  The trial court agreed with the employee.   The appellate court, however, reversed the trial court and found that the former employee failed to consider the express terms of her contract that stated, “Any subsequent change or changes in my duties, salary, or compensation will not affect the validity or scope of this Agreement . . . .”  The Court found that this provision applied and that the 2-year period did not begin to run until after the work relationship ended and certainly not at the point when she became an independent contractor working for the the same company!  To hold otherwise would have allowed her to work for the company for two years, leave and then immediately open up the same business down the street.   The opinion noted that the former employee’s interpretation would create an absurd result that the Court would not condone.

Although the holding is specific to the Anarkali Boutique case, the decision demonstrates the importance of contract drafting.   It is certainly possible that the absence of the above-clause could have led to a different result which, from the former employer’s viewpoint, could have been disastrous.  In the end, contract drafting is crucial as it establishes the rights of the employer and the employee.

Brad Kelsky, Esq., and Kelsky Law, P.A., welcome the opportunity to review and draft non-compete agreements for employers and individuals.

This article does not constitute legal advice or the formation of an attorney-client relationship, and is not for re-publication without express permission of the author.

Brad Kelsky