SB 882 — Restrictive Covenants

Florida Senate - 2019 CS for SB 882 By Senatorthe GrutersCommittee 23-00476B-19on 2019882__Commerce Aand billTourism; to be entitled An act relating to restraints of trade or commerce;

amendingand s.Senator Gruters 577-04030-19 2019882c1 A bill to be entitled An act relating to restrictive covenants;

542.335,creating F.S.;s.

revising542.336, theF.S.; requirements for a contract that restricts or prohibits competition;

redefiningproviding thethat termcertain “legitimaterestrictive businesscovenants interest”are tovoid includeand onlyunenforceable interestsfor relateda tospecified intellectualperiod; property;

providing applicability;

107 Be It Enacted by the Legislature of the State of Florida:

129 Section 1. Subsection1. Section (1)542.336, of section 542.335, Florida Statutes, is amendedcreated to read:

542.335 Valid542.336 Invalid restraintsrestrictive ofcovenants.—A traderestrictive covenant entered into with a physician licensed under chapter 458 or commerce.—chapter (1) Notwithstanding459 s.who practices a medical specialty in a county where one entity employs or contracts with, either directly or through related or affiliated entities, all physicians who practice such specialty in that county is not supported by a legitimate business interest and is void and unenforceable.

542.18Such restrictive covenant shall remain void and subsectionunenforceable (2),for enforcement3 ofyears contractsafter thatthe restrictdate oron prohibitwhich competitiona duringsecond entity that employs or aftercontracts thewith, termeither ofdirectly restrictiveor covenants,through sorelated longor asaffiliated suchentities, contractsone areor reasonablemore inphysicians time,who area,practice andsuch linespecialty ofbegins business,serving ispatients notin prohibited.that county.

InSection any2. This actionact concerningshall enforcementtake ofeffect aJuly restrictive1, covenant:2019.

(a) A court shall not enforce a restrictive covenant unless it is set forth in a writing signed by the person against whom enforcement is sought.

(b) The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.

The term “legitimate business interest” means includes, but is not limited to:

1. Trade secrets, as defined in s.

688.002(4).

2. Valuable confidential business or professional information that otherwise does not qualify as trade secrets.

3. Substantial relationships with specific prospective or existing customers, patients, or clients.

3.4. Customer, patient, or client goodwill associated with:

a. an ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress.”;

b. A specific geographic location;

or c. A specific marketing or trade area.

5. Extraordinary or specialized training.

41 Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.

(c) A person seeking enforcement of a restrictive covenant also shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction.

If a person seeking enforcement of the restrictive covenant establishes prima facie that the restraint is reasonably necessary, the person opposing enforcement has the burden of establishing that the contractually specified restraint is overbroad, overlong, or otherwise not reasonably necessary to protect the established legitimate business interest or interests.

If a contractually specified restraint is overbroad, overlong, or otherwise not reasonably necessary to protect the legitimate business interest or interests, a court shall modify the restraint and grant only the relief reasonably necessary to protect such interest or interests.

(d) In determining the reasonableness in time of a postterm restrictive covenant not predicated upon the protection of trade secrets, a court shall apply the following rebuttable presumptions:

1. In the case of a restrictive covenant sought to be enforced against a former employee, agent, or independent contractor, and not associated with the sale of all or a part of:

a. The assets of a business or professional practice, or b. The shares of a corporation, or c. A partnership interest, or d. A limited liability company membership, or e. An equity interest, of any other type, in a business or professional practice, 73 a court shall presume reasonable in time any restraint 6 months or less in duration and shall presume unreasonable in time any restraint more than 2 years in duration.

2. In the case of a restrictive covenant sought to be enforced against a former distributor, dealer, franchisee, or licensee of a trademark or service mark and not associated with the sale of all or a part of:

a. The assets of a business or professional practice, or b. The shares of a corporation, or c. A partnership interest, or d. A limited liability company membership, or e. An equity interest, of any other type, in a business or professional practice, 87 a court shall presume reasonable in time any restraint 1 year or less in duration and shall presume unreasonable in time any restraint more than 3 years in duration.

3. In the case of a restrictive covenant sought to be enforced against the seller of all or a part of:

a. The assets of a business or professional practice, or b. The shares of a corporation, or c. A partnership interest, or d. A limited liability company membership, or e. An equity interest, of any other type, in a business or professional practice, 99 a court shall presume reasonable in time any restraint 3 years or less in duration and shall presume unreasonable in time any restraint more than 7 years in duration.

(e) In determining the reasonableness in time of a postterm restrictive covenant predicated upon the protection of trade secrets, a court shall presume reasonable in time any restraint of 5 years or less and shall presume unreasonable in time any restraint of more than 10 years.

All such presumptions shall be rebuttable presumptions.

(f) The court shall not refuse enforcement of a restrictive covenant on the ground that the person seeking enforcement is a third-party beneficiary of such contract or is an assignee or successor to a party to such contract, provided:

1. In the case of a third-party beneficiary, the restrictive covenant expressly identified the person as a third party beneficiary of the contract and expressly stated that the restrictive covenant was intended for the benefit of such person.

2. In the case of an assignee or successor, the restrictive covenant expressly authorized enforcement by a party’s assignee or successor.

(g) In determining the enforceability of a restrictive covenant, a court: