Enforceability of Non-Compete Clauses In The Face of Non-PaymentMarch 13, 2014
Contracts should, where applicable, provide for performance to be completed by a date certainApril 28, 2014
In another non-compete decision, the Florida Second District Court of Appeal reversed the denial of a former employer’s request for injunctive relief even though the employer ceased operations. In Richland Towers, Inc. v. Denton, 39 Fla. L. Weekly D535 (Fla. 2d DCA March 12, 2014), the court addressed (directly and indirectly) issues involving the cessation of the employer’s business, the identification of a specific third-party beneficiary in the non-compete agreement, the concept of dependent/independent clauses and how rules of contract construction affect non-compete provisions. The defense creatively argued that it should not be subject to the restrictive covenant because the former employer’s business ceased to operate. The problem for the former employees, however, was that the non-compete agreement specifically identified that the agreement would inure to a specifically-named third party beneficiary. As a result, the non-compete agreement was enforceable by that third party beneficiary even though the actual former employer no longer operated. Additionally, the former employees argued that the agreement was not enforceable because the former employer did not pay the full amount of compensation due them. Even if this were true, however, the court noted that the non-compete agreement was an independent covenant and would remain enforceable even in the face of the former employer’s breach. (In contrast, the employer’s breach of a dependent covenant could render the non-compete to be unenforceable.) Finally, the defense tried to avoid injunctive relief by employing a grammatical rule that would have changed the terms of the agreement. The court, however, rejected the claim by finding that it was obligated to provide meaning to the clear and unambiguous terms of the agreement. Thus, the court concluded, the former employer and the third-party beneficiary should have been granted injunctive relief.
Here, a well-drafted non-compete agreement protected the employer/third-party beneficiary and affirmed our opinion that an employee should assume the non-compete is enforceable unless proven otherwise. This requires an analysis of the non-compete agreement along with the consideration of the facts and circumstances leading to termination and whether the former employees have potential defenses. Kelsky Law, P.A., is available to consult on all non-compete matters.