Providing community association management services to community associations is highly competitive. Because of this competitiveness and the substantial financial investment made by a community association management company in its managers, many community association management companies require their managers to sign non-compete agreements as a condition of their employment. Often, once signed, the non-compete agreement is not thought of again until the manager decides to work for a different community association management company.
Under Florida law, non-compete agreements may be enforced by the prior employer so long as they are reasonable in time, geographical, line of business and are in place to protect a legitimate business interest of the employer as defined by section 542.335, Florida Statutes. Typically, non-compete agreements lasting up to two years in duration and covering geographical areas where the employer actually conducts business will be considered enforceable by a court. Further, pursuant to section 542.335(g)1., Florida Statutes, in determining the enforceability of a non-compete agreement, a court cannot take into consideration “any individualized economic or other hardship that might be caused to the person against whom enforcement is sought.”
However, this express prohibition against considering the hardship created on the former employee may be losing its sting based upon the unpublished August 27, 2015 opinion of the Eleventh Circuit Court in TransUnion Risk and Alternative Data Solutions, Inc. v. MacLachlan, No. 15-10985.
In the MacLachlan case, the employee, MacLachlan, signed a non-compete agreement which provided that MacLachlan could not engage in the same or any similar business for one year. MacLachan was recruited by a rival company and began employment with this rival company three days after issuing his resignation to TransUnion Risk and Alternative Data Solutions, Inc. (“TRADS”). In an effort to enforce the non-compete agreement, TRADS then filed an action with the court for an injunction to prohibit MacLachlan from working for its rival company. During litigation, MacLachlan argued, among other defenses, that TRADS was not entitled to receive an injunction because the harm of the injunction to MacLachlan would outweigh any damage to TRADS. On appeal, the Eleventh Circuit Court, a Federal court with jurisdiction over Alabama, Florida and Georgia, found in favor of MacLachlan.
In doing so, the Eleventh Circuit Court analyzed the construction of section 542.335, Florida Statutes. The Court found that the express prohibition against considering the hardship which might be caused to the former employee as set out in section 542.335(g)1., Florida Statutes, was only with regard to determining whether or not a non-compete agreement is enforceable, and not with regard to the enforcement of the non-compete clause.
Once a non-compete agreement is deemed enforceable, the statute then sets out certain rules for enforcement. Because TRADS was seeking enforcement of the non-compete agreement and not a determination of whether or not the non-compete agreement was enforceable, the Court determined that it was permitted to take the hardship caused to the former employee into consideration when determining the manner of enforcement of the non-compete agreement.
While the MacLachlan case is not exactly binding on Florida state courts because it is a Federal court ruling and is an unpublished decision, it can be used as persuasion in other cases where the non complete agreement creates a hardship on the prior employee. In other words, if successful, this means that courts may begin to consider the financial and other hardships caused to the former employee through strict enforcement of a non-compete agreement. Whether this case will have significant impact on managers who sign non-compete agreements that prevent them from seeking employment with a competitor is something that only time will tell.