Bill Text: FL S0882 | 2019 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Restrictive Covenants

Spectrum: Bipartisan Bill

Status: (Failed) 2019-05-03 - Died in Judiciary, companion bill(s) passed, see CS/HB 843 (Ch. 2019-138) [S0882 Detail]

Download: Florida-2019-S0882-Introduced.html

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       Florida Senate - 2019                                     SB 882
       
       
        
       By Senator Gruters
       
       
       
       
       
       23-00476B-19                                           2019882__
    1                        A bill to be entitled                      
    2         An act relating to restraints of trade or commerce;
    3         amending s. 542.335, F.S.; revising the requirements
    4         for a contract that restricts or prohibits
    5         competition; redefining the term “legitimate business
    6         interest” to include only interests related to
    7         intellectual property; providing applicability;
    8         providing an effective date.
    9          
   10  Be It Enacted by the Legislature of the State of Florida:
   11  
   12         Section 1. Subsection (1) of section 542.335, Florida
   13  Statutes, is amended to read:
   14         542.335 Valid restraints of trade or commerce.—
   15         (1) Notwithstanding s. 542.18 and subsection (2),
   16  enforcement of contracts that restrict or prohibit competition
   17  during or after the term of restrictive covenants, so long as
   18  such contracts are reasonable in time, area, and line of
   19  business, is not prohibited. In any action concerning
   20  enforcement of a restrictive covenant:
   21         (a) A court shall not enforce a restrictive covenant unless
   22  it is set forth in a writing signed by the person against whom
   23  enforcement is sought.
   24         (b) The person seeking enforcement of a restrictive
   25  covenant shall plead and prove the existence of one or more
   26  legitimate business interests justifying the restrictive
   27  covenant. The term “legitimate business interest” means
   28  includes, but is not limited to:
   29         1. Trade secrets, as defined in s. 688.002(4).
   30         2. Valuable confidential business or professional
   31  information that otherwise does not qualify as trade secrets.
   32         3. Substantial relationships with specific prospective or
   33  existing customers, patients, or clients.
   34         3.4. Customer, patient, or client goodwill associated with:
   35         a. an ongoing business or professional practice, by way of
   36  trade name, trademark, service mark, or “trade dress.”;
   37         b. A specific geographic location; or
   38         c. A specific marketing or trade area.
   39         5. Extraordinary or specialized training.
   40  
   41  Any restrictive covenant not supported by a legitimate business
   42  interest is unlawful and is void and unenforceable.
   43         (c) A person seeking enforcement of a restrictive covenant
   44  also shall plead and prove that the contractually specified
   45  restraint is reasonably necessary to protect the legitimate
   46  business interest or interests justifying the restriction. If a
   47  person seeking enforcement of the restrictive covenant
   48  establishes prima facie that the restraint is reasonably
   49  necessary, the person opposing enforcement has the burden of
   50  establishing that the contractually specified restraint is
   51  overbroad, overlong, or otherwise not reasonably necessary to
   52  protect the established legitimate business interest or
   53  interests. If a contractually specified restraint is overbroad,
   54  overlong, or otherwise not reasonably necessary to protect the
   55  legitimate business interest or interests, a court shall modify
   56  the restraint and grant only the relief reasonably necessary to
   57  protect such interest or interests.
   58         (d) In determining the reasonableness in time of a postterm
   59  restrictive covenant not predicated upon the protection of trade
   60  secrets, a court shall apply the following rebuttable
   61  presumptions:
   62         1. In the case of a restrictive covenant sought to be
   63  enforced against a former employee, agent, or independent
   64  contractor, and not associated with the sale of all or a part
   65  of:
   66         a. The assets of a business or professional practice, or
   67         b. The shares of a corporation, or
   68         c. A partnership interest, or
   69         d. A limited liability company membership, or
   70         e. An equity interest, of any other type, in a business or
   71  professional practice,
   72  
   73  a court shall presume reasonable in time any restraint 6 months
   74  or less in duration and shall presume unreasonable in time any
   75  restraint more than 2 years in duration.
   76         2. In the case of a restrictive covenant sought to be
   77  enforced against a former distributor, dealer, franchisee, or
   78  licensee of a trademark or service mark and not associated with
   79  the sale of all or a part of:
   80         a. The assets of a business or professional practice, or
   81         b. The shares of a corporation, or
   82         c. A partnership interest, or
   83         d. A limited liability company membership, or
   84         e. An equity interest, of any other type, in a business or
   85  professional practice,
   86  
   87  a court shall presume reasonable in time any restraint 1 year or
   88  less in duration and shall presume unreasonable in time any
   89  restraint more than 3 years in duration.
   90         3. In the case of a restrictive covenant sought to be
   91  enforced against the seller of all or a part of:
   92         a. The assets of a business or professional practice, or
   93         b. The shares of a corporation, or
   94         c. A partnership interest, or
   95         d. A limited liability company membership, or
   96         e. An equity interest, of any other type, in a business or
   97  professional practice,
   98  
   99  a court shall presume reasonable in time any restraint 3 years
  100  or less in duration and shall presume unreasonable in time any
  101  restraint more than 7 years in duration.
  102         (e) In determining the reasonableness in time of a postterm
  103  restrictive covenant predicated upon the protection of trade
  104  secrets, a court shall presume reasonable in time any restraint
  105  of 5 years or less and shall presume unreasonable in time any
  106  restraint of more than 10 years. All such presumptions shall be
  107  rebuttable presumptions.
  108         (f) The court shall not refuse enforcement of a restrictive
  109  covenant on the ground that the person seeking enforcement is a
  110  third-party beneficiary of such contract or is an assignee or
  111  successor to a party to such contract, provided:
  112         1. In the case of a third-party beneficiary, the
  113  restrictive covenant expressly identified the person as a third
  114  party beneficiary of the contract and expressly stated that the
  115  restrictive covenant was intended for the benefit of such
  116  person.
  117         2. In the case of an assignee or successor, the restrictive
  118  covenant expressly authorized enforcement by a party’s assignee
  119  or successor.
  120         (g) In determining the enforceability of a restrictive
  121  covenant, a court:
  122         1. Shall not consider any individualized economic or other
  123  hardship that might be caused to the person against whom
  124  enforcement is sought.
  125         2. May consider as a defense the fact that the person
  126  seeking enforcement no longer continues in business in the area
  127  or line of business that is the subject of the action to enforce
  128  the restrictive covenant only if such discontinuance of business
  129  is not the result of a violation of the restriction.
  130         3. Shall consider all other pertinent legal and equitable
  131  defenses.
  132         4. Shall consider the effect of enforcement upon the public
  133  health, safety, and welfare.
  134         (h) A court shall construe a restrictive covenant in favor
  135  of providing reasonable protection to all legitimate business
  136  interests established by the person seeking enforcement. A court
  137  shall not employ any rule of contract construction that requires
  138  the court to construe a restrictive covenant narrowly, against
  139  the restraint, or against the drafter of the contract.
  140         (i) No court may refuse enforcement of an otherwise
  141  enforceable restrictive covenant on the ground that the contract
  142  violates public policy unless such public policy is articulated
  143  specifically by the court and the court finds that the specified
  144  public policy requirements substantially outweigh the need to
  145  protect the legitimate business interest or interests
  146  established by the person seeking enforcement of the restraint.
  147         (j) A court shall enforce a restrictive covenant by any
  148  appropriate and effective remedy, including, but not limited to,
  149  temporary and permanent injunctions. The violation of an
  150  enforceable restrictive covenant creates a presumption of
  151  irreparable injury to the person seeking enforcement of a
  152  restrictive covenant. No temporary injunction shall be entered
  153  unless the person seeking enforcement of a restrictive covenant
  154  gives a proper bond, and the court shall not enforce any
  155  contractual provision waiving the requirement of an injunction
  156  bond or limiting the amount of such bond.
  157         (k) In the absence of a contractual provision authorizing
  158  an award of attorney’s fees and costs to the prevailing party, a
  159  court may award attorney’s fees and costs to the prevailing
  160  party in any action seeking enforcement of, or challenging the
  161  enforceability of, a restrictive covenant. A court shall not
  162  enforce any contractual provision limiting the court’s authority
  163  under this section.
  164         Section 2. The amendments to s. 542.335, Florida Statutes,
  165  made by this act apply only in actions determining the
  166  enforceability of restrictive covenants entered into on or after
  167  July 1, 2019.
  168         Section 3. This act shall take effect July 1, 2019.