Introduction
Section 542.335(1)(d)(1) through (3) lays out rebuttable presumptions for reasonable time limitations contained in non-compete agreements. Where a party seeks to enforce a non-compete agreement against a former employee, agent or independent contractor, the court “shall presume reasonable” any time period of six months or less. Likewise, non-competes in this category containing a time duration greater than two years shall be presumed unreasonable. Fla. Stat. § 542.335(1)(d)(1).
For a party seeking to enforce a non-compete against a former distributor, dealer, franchisee or licensee of a trademark or service mark, section 542.335(1)(d)(2) creates a presumption that non-competes for a duration of one year or less are reasonable, whereas agreements restraining competition for three years or more are unreasonable. Under section 542.335(1)(d)(3), non-competes enforced against the seller of a business are presumed reasonable if the restraint on competition is for three years or less. Non-competes restraining competition by the seller of a business which are more than seven years in duration are presumed unreasonable.
Modification
Like with geographic scope provisions that are overly broad, non-compete agreements containing unreasonable durations should be modified by the court so as to make the agreement reasonably necessary to protect business interests. See Fla. Stat. § 542.335(1)(c)(providing in part that “[i]f 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.”)
In Henao v, Professional Shoe Repair, Inc., 929 So.2d 723 (Fla. 5th DCA 2006), the Fifth District had to consider whether a non-compete agreement applied to the seller of a business complied with section 542.335. In addressing the time period contained within the non-compete agreement, the Fifth District found as follows:
The ten year duration of the non-compete provision seems problematic given that subsection 542.335(1)(d)(3) provides that where a restrictive covenant is sought to be enforced against the seller of a business or the shares of a corporation, a restraint of more than seven years duration is presumed unreasonable. … Given an otherwise valid and enforceable covenant not to compete, the trial court could reduce the ten year time period. Id. at 728.
Henao illustrates how courts handle non-compete agreements which, although are overly broad or “overlong”, are otherwise enforceable. The Fifth District in Henao found that the non-compete agreement was not an illegal restraint of trade, even though the duration of the agreement (ten years) exceeded the seven year presumption of reasonableness provided under the statute. Id. at 729. Instead of rejecting the non-compete agreement, the Henao court remanded the proceeding back to the district court so that the term of the agreement would comply with the statute. See also, Balasco v. Gulf Auto Holding, Inc., 707 So.2d 858, 860 (Fla. 2d DCA 1998(holding that the three year restriction in an employee non-compete agreement was presumptively unreasonable. Further holding that “[b]ecause we find no evidence in the record to rebut this presumption, the agreement shall not be enforceable for more than two years following [the employee’s] separation from the [employer]. … On remand, the order granting relief should be amended to reduce the period of restraint to two years.”)