Thou Shalt Presume Irreparable Harm (when construing non-compete agreements)
When a current or former employee violates a non-competition agreement, the first stop for the litigation train is usually preliminary injunctive relief. To secure that relief in a Florida Court, the plaintiff-employer needs to prove (among other things) irreparable harm, which generally means harm that cannot be adequately compensated with a monetary award.
Satisfiying this standard in Florida is made easier by jurisprudence that presumes irreparable harm if the plaintiff-employer can show that the defendant-employee violated an enforceable non-competition agreement. In a recent opinion, a Florida appellate court reversed the trial court’s denial of a motion for preliminary injunction after concluding that the trial court had not properly applied the presumption of irreparable harm. The appellate court summarized its conclusions: “Because the trial court failed to properly apply the presumption of irreparable harm flowing from violations of the agreement and improperly determined that evidence in support of a fraudulent inducement affirmative defense precluded a temporary injunction, we reverse and remand for the entry of a temporary injunction.” Picture It Sold Photography, LLC v. Bunkelman, — So. 3d —, 2020 WL 88815 *1, Case No. 4D19-1427 (Fla. 4th DCA Jan. 8, 2020).
The business at issue in the case is a photography studio that provides services to real estate professionals. The business hires contractors to provide the services on its behalf. The non-competition agreement at issue precluded the contractor, both during the contractual term and for two years thereafter, from directly or indirectly soliciting, competing for, diverting, or taking away any customer, as well as from participating in any competitive business. Id. at *1. The contractor became dissatisfied with his earnings and decided to provide photography services to customers on his own, without the studio’s involvement. The studio learned of the contractor’s actions and filed suit.
In defending against the studio’s claims, the former contractor argued that the customers with which the contractor continued to do business would have left the stuido anyway. The appellate court explained: “Several customers, but not all, testified that they would not use Employer again, for reasons that had nothing to do with Contractor.” Id. at *2. This is a somewhat common argument seen in non-compete cases, which asks a court to rule in favor of the former employee because the customer voluntarily left the former employer and not because the customer was solicited by the former employee. One problem with this argument, as the appellate court pointed out in its opinion, is that it ignores the dictates of a non-competition agreement, which expressly preclude the former employee from competing with the former employer for any customers. Id. at *3. One practice pointer regarding this issue is the importance of prohibiting both solicitation of customers and accepting any business from customers. If the contract at issue in this case had included language precluding the contractor from accepting any business, then the contactor’s arguments regarding the customer’s reasons for discontinuing business with the former employer would have been even weaker.
The appellate court also rejected the contractor’s argument that he was defrauded into signing the contract by the studio’s false promises of future earnings. In reversing the trial court’s denial of the motion for preliminary injunctive relief, the appellate court rejected the contractor’s fraud defense on the basis that the contract contained both an integration clause and clear language that defined how any compensation would be calculated. Additionally, the appellate court held that the contractor’s renewal of the contract after one year negated any showing of justifiable reliance on the alleged false statements made by the studio in procuring the original execution of the contract. Id. at *4. These conclusions by the appellate court underscore the importance of including clear integration clauses in all contracts, and especially in employment contracts that contain non-compete provisions.
Thus, a former employee’s breach of an enforceable non-compete provision carries with it a presumption of irreparable harm that calls for the entry of injunctive relief, unless the employee can factually establish a meritorious defense.