/>iOn April 24, House Bill 1219 was passed by the Florida Legislature, marking a new, even more employer-centric era for noncompete agreements and other restrictive covenants in the Sunshine State. The bill, titled “Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act,” (the Act) expands and builds on Florida’s current noncompete statute, Fla. Stat. 542.335, adding two new provisions that broaden employers’ abilities to enforce noncompete agreements in employment contracts: covered garden leave agreements and covered noncompete agreements.
Covered Garden Leave Agreements
The Act’s covered garden leave provision allows an employer to keep an employee on the payroll during the “notice period,” i.e., the period after the employee has given notice that they intend to end the employment relationship, but before the set date of termination. Although an employer has an obligation to continue to pay employees during the “garden period,” it is not required that employees on garden leave receive any discretionary incentive compensation. In addition, employers can restrict employees on garden leave from performing any work for both the employer enforcing the agreement and additional employers, regardless of the nature of the work.
In short, the CHOICE Act sets forth that employees must provide their employers with a predetermined amount of notice before terminating their employment. Notably, under the Act, employers can set an employee’s notice period to begin up to four years before termination, although employers can reduce or extinguish it with 30-day written notice to the employee. Finally, the employee must (1) be given at least seven days to consider this agreement and the right to have a lawyer review it; and (2) acknowledge the receipt of confidential information or customer relationships.
Covered Noncompete Agreements
Under the covered noncompete provision of the CHOICE Act, employers can restrict employees who meet certain financial and compensation thresholds from engaging in competition in a specified geographic area for up to four years after the termination of the employment. However, this “specified” geographic area is defined at the discretion of the employer; there is no requirement that the restrictions be narrowly tailored, or even reasonable. In theory, this allows a worldwide geographic scope.
As with a garden leave agreement, in order for a covered noncompete to be enforceable, employees must be given at least seven days to review the agreement and must be told of their right to obtain legal counsel. In addition, employees must be informed and acknowledge that as part of their role, they will be privy to confidential information or trade secrets.
If employees breach their employment agreement, under the Act, an employer is entitled to immediate injunctive relief as well as monetary damages. It is then the employee’s burden to establish, by clear and convincing evidence, that (1) the employer failed to perform a duty under the agreement; (2) the employee will not engage in similar work or use any previously obtained confidential information or customer relationships obtained during their previous employment; or (3) the new or prospective employer is not involved in or preparing to enter a business similar to the employer enforcing the restriction.
Covered Employees
Notably, the CHOICE Act does not impact all employees. In order to be subject to the Act, employees, which includes independent contractors, must be classified as “covered employees,” defined as individuals who either earn or are expected to earn over twice the annual mean wage of the county in which the employer has its principal place of business. In the event that the employee works for a foreign corporation or an out-of-state employer but resides in Florida, the wage threshold is determined using the mean wage in the county of the employee’s residence. The CHOICE Act also creates a blanket exemption for defined healthcare practitioners.
What’s Next for Employers?
The CHOICE Act, which is expected to be signed by Gov. Ron DeSantis in the coming days, will take effect on July 1. In the meantime, it is critical that employers assess and revise their employment agreements to ensure they are in compliance with the procedures laid out by the Act. Although the CHOICE Act broadens the scope of permissible noncompete agreements, it also lays out specific technical requirements that employers must follow in order to ultimately enforce these agreements. Additionally, before attempting to get an independent contractor to enter into a CHOICE Act agreement, employers should consult with their lawyers to assess whether this would impact the classification of someone as an “independent contractor” as opposed to an “employee.” Finally, employers in multistate businesses should be aware that it is likely that litigation will be brought by employees located in other states if those states have laws that conflict with Florida’s approach to noncompete agreements.
