In Florida, a non-compete clause is commonly used in employment contracts. To be enforceable, Florida law requires the non-compete to be in writing, signed by the employee, protect an employer’s legitimate business interests, and be reasonable in time, geographic area, and line of business.
This post focuses on the element of time and how to postpone employee non-compete start dates with survival clauses.
Typical non-competes restrict employees from competing with their employers during the term of employment and for a specified duration after the expiration or termination of the employment agreement. Once the agreement expires or terminates, the start date of the non-compete is triggered. The same applies in cases where the agreement expires but the employee-employer relationship continues without a written contract. This causes the intended post-employment duration of the non-compete to be shortened. To avoid this result, the typical course of action is either renewing or amending the agreement to extend its expiration date, which then also postpones the post-employment start date of the non-compete. In the absence of doing either of these, an additional method to postpone the activation date of a non-compete is including a survival clause that expressly applies to the non-compete clause in the agreement.
Using a survival clause to effectuate such a result is nicely illustrated in the case of Alonso-Llamzares v. Int'l Dermatology Research, Inc., 339 So. 2d 385 (Fla. 3d DCA 2022). In this case, International Dermatology Research, Inc. (IDR) employed Dr. Alonso to conduct clinical research. The parties entered into a written employment agreement that included both a non-compete and survival clause. The non-compete restricted the physician from working for a competing business during his employment and for two years after the expiration or termination of the agreement. The survival clause contained language to ensure the non-compete would survive the termination or expiration of that agreement.
Two years later, the agreement expired. The parties continued their employment relationship but without renewing their agreement or entering into a new one. Subsequently, the parties amended their original agreement, including extending its expiration date to December 31, 2017. Following its expiration, the parties continued their employment relationship but without renewing or amending the last amended agreement, and without entering into a new written contract.
A couple of years later, on November 19, 2019, IDR terminated Dr. Alonso. Roughly two months following his termination, on January 2, 2020, Dr. Alonso started operating a competing business. IDR learned of this and sued him for, among other claims, breach of his non-compete.
Dr. Alonso argued the employment agreement expired on December 17, 2017 and the non-compete had therefore expired two years following that, on December 31, 2019. Because he started competing with IDR on January 2, 2020, Dr. Alonso argued there was no breach. IDR disagreed, arguing the non-compete was in effect at the time he started to compete. Relying on the survival clause and its explicit application to the non-compete clause, IDR contended the start date of the non-compete was November 1, 2019 (when their employment relationship ended) and was in effect until November 1, 2021.
The trial court agreed with IDR and entered judgment in its favor. Dr. Alonso appealed the trial court's ruling. In reviewing the record and relying on well-established Florida law covering non-competes, the appellate court explained:
“This Court has held that post-termination restrictions expire upon the termination of an agreement for a specific term, even if an employee remains an at-will employee after the term of the written agreement expires….This principle applies where the restrictive covenant provides that it applies following termination of employment and the parties' agreement does not expressly provide that the covenant survives the expiration of the employment contract….”
Alonso-Llamzares, 339 So. 2d at 394 (emphasis added) (internal citations omitted).
Consequently, the appellate court agreed that the survival clause had effectively postponed the start date of the non-compete to begin on the date that the parties ended their employment relationship and not upon the expiration or termination of their employment agreement. As Dr. Alonso was competing with IDR while the non-compete was still in effect, the appellate court concurred with the trial court's judgment in favor of IDR.
Takeaway
Employment agreements containing non-competes without an applicable survival clause will cause the post-employment duration of the non-compete to start upon the termination or expiration date of the agreement. To preserve the post-employment duration of an employee non-compete, an employment agreement should either:
be renewed before it expires to extend its expiration date,
be amended to extend its expiration date, or
include a survival clause containing language that unequivocally applies to the survival of the non-compete clause upon the agreement's expiration or termination.
The information provided in this post is for general informational purposes and not intended as legal advice or legal opinion for any individual matter. Keep in mind that legal developments or changes to law may occur in the future and, as such, the information contained in this post may not be the most up-to-date legal or other information. Do consult your own attorney for any legal advice you may require. If you do not have an attorney and would like to explore a potential engagement for my services, please reach out to me via the contact submission form or by using the contact information provided in my bio.