Florida’s CHOICE Act Expands Protections for Employers in Noncompete and Garden Leave Agreements

Although Florida has had a statute which generally favored enforcement of reasonable noncompetes for many years, the CHOICE Act substantially expands what is presumptively enforceable under Florida law and likely imposes the most employer-friendly standard for enforcement of employee noncompetes for any state in the country.

What You Need to Know

The CHOICE Act is a significant departure from the general trend in restrictive covenant legislation across the country. Most state legislation in this area focuses on limiting the use of noncompetes, whether by passing bans on their use in certain professions, adding notice requirements and other “bells and whistles,” or imposing compensation thresholds. Although the CHOICE Act does include a compensation threshold, it otherwise departs from the general trend by making it more likely for a noncompete or garden leave provision to be enforced and placing the burden of proof on the employee rather than the employer.

Current Law and Overview of the CHOICE Act

Prior to the CHOICE Act, restrictive covenants in Florida were enforced if they were reasonable in scope of time, geography, and restricted activity. The burden was on the employer to demonstrate that a restriction is reasonable and should be enforced.

The CHOICE Act turns the current standard on its head, creating a presumption that covered noncompete provisions and garden leave clauses are enforceable if they meet the requirements of the statute. The CHOICE Act further requires a court to issue an injunction unless the employee can demonstrate that their new employment would not result in unfair competition.

In passing the CHOICE Act, Florida’s legislature found that the state’s interests were served “by enforcing strong legal protections in contracts between employers and contracted personnel which encourage optimal levels of information sharing and training and development.” The legislature also expressly found that other forms of restrictive covenants, including non-solicitation provisions, nondisclosure agreements, and fixed-duration term agreements, do not adequately protect these interests. As such, the CHOICE Act focuses only on noncompete provisions and garden leave agreements.

Key Provisions

A “covered employee” is defined as an employee or independent contractor whose salary exceeds twice the annual mean wage of the Florida county where the employer’s principal place of business is located, or the Florida county where the employee resides if the employer’s principal place of business is out-of-state. Notably, the definition of salary excludes any discretionary incentives or awards and anticipated but indeterminable compensation like bonuses, tips, and commissions, among other excluded items.

A “covered employer” is defined as any employer who employs or engages with a “covered employee,” excluding health care practitioners.

The Act does not apply to health care practitioners or standalone confidentiality or non-solicitation agreements.

Noncompete Agreements

A “covered noncompete agreement” under the CHOICE Act is a written agreement between a covered employer and a covered employee in which the employee agrees not to engage in employment with another employer if (1) they will provide services similar to the services provided to the employer during the three years preceding termination of employment or (2) where it is reasonably likely the covered employee would use the employer’s confidential information or customer relationships.

Covered employers and employees are free to define the geographic scope in their agreement, and these agreements remain fully enforceable for up to four years post-termination of the covered employee. To be enforceable, covered noncompete agreements must meet the following requirements:

• The covered employee must be advised in writing that they have a right to seek counsel before executing the agreement.
• The covered employee must acknowledge in writing that they will receive confidential information or access to customer relationships in the course of their employment.
• The covered employee must be provided with the agreement at least seven days before the offer of employment expires or, for current covered employees, the date the offer to enter into the agreement expires.

In addition to the above, a covered noncompete agreement must stipulate that the noncompete period — defined as the time from termination to an agreed-upon future date of noncompetition — is reduced day-for-day for any non-working portion of a notice period under any applicable garden leave provision.

Garden Leave Agreements

Unlike noncompete provisions, which restrict an employee’s actions after their employment is terminated, a garden leave provision is a written agreement between a covered employer and covered employee where the employer agrees to keep the employee on its payroll for a specified period after an employee gives or is given notice of termination. Under the CHOICE Act, the specified notice period cannot exceed four years, and the employee is not required to provide any services to the covered employer after the first 90 days of the notice period.

Covered garden leave agreements must also meet the following requirements to be enforceable:

• The covered employee must be advised in writing that they have a right to seek counsel before executing the agreement.
• The covered employee must acknowledge in writing that they will receive confidential information or access to customer relationships in the course of their employment.
• The agreement must explain that the covered employer can reduce the notice period so long as 30 days’ notice is provided in writing to the covered employee.
• The covered employee must be provided with the agreement at least seven days before the offer of employment expires or, for current covered employees, the date the offer to enter into the agreement expires.
• The covered employer must agree to pay the covered employee their regular base salary and benefits during the notice period.
• The covered employee must be informed that they may engage in nonwork activities at any time, without limitation, for the remainder of the notice period.
• The covered employee must be informed that they may, with permission from the covered employer, work for another employer for the remainder of the notice period.

What Employers Should Know

For employers who may benefit from the CHOICE Act, it is crucial to ensure that noncompete and garden leave provisions are drafted in compliance with the law’s requirements. The CHOICE Act on its face appears to apply to employers with a principal place of business in Florida as well as out of state employers with employees in Florida, though there is potential for it to be interpreted more broadly. It does not apply to health care practitioners, regardless of location. Employers should carefully review existing form agreements.

It is also important to note that although Florida has a very generous choice of law statute for contract enforcement[1], the statute expressly does not extend to employment contracts. As such, a traditional choice of law analysis will apply, requiring those that wish to benefit from the CHOICE Act’s employer-friendly provisions to demonstrate a reasonable relationship between the contract and Florida and to prove that Florida’s law would not conflict with the alternative state’s law.

If you have any questions about the CHOICE Act, contact the authors or your usual ArentFox Schiff attorney.