The Chicago Cubs, Errors, and Arbitration of Florida Non-Compete Agreements

Some clients prefer to resolve disputes in arbitration. In theory, an arbitration proceeding can more quickly and — in some instances — more cost effectively resolve disputes. However because most arbitration clauses call for binding arbitration, many clients prefer to litigate disputes in court. At least a defeat in a courtroom carries with it the ability to appeal. If the court makes a clear legal error, the argument goes, an appellate panel can collectively correct the error and “set matters right.”

The Chicago Cubs are a National League baseball team. Perhaps you’ve heard of them? Like an arbitration panel, it is difficult to overcome some of their errors. The Chicago Cubs, by almost any standard, had an excellent 2015 baseball season. An impressive pitching staff, an optimistic and experienced manager, and a great second-half team effort allowed the Cubs to win the National League Wildcard Playoff and to beat the St. Louis Cardinals in the opening series. Instant replay may have decided some of the calls. None of those calls was subject to arbitration.

Getting back to Florida Non-Competes, a client recently asked the question: “Can parties agree to arbitrate, rather than litigate, an otherwise valid Florida Non-Compete agreement?” The simple answer is “yes.” The question gets more complicated when the sale of a business raises possible violations of the Non-Compete agreement and no arbitration clause exists in the purchase and sale documents relating to the sale. At least one appellate court in Florida determined that the question of whether or not the employee ran afoul of the Non-Compete agreement was subject to arbitration, despite the fact that the documents controlling the sale of the business contained no such provision.

In the matter noted above, the two-year Non-Compete agreement stated that during “the period of his employment… and for a period of two years immediately following the termination of such employment for whatever reason, Employee shall not have any direct or indirect ownership or other financial interest in any business which competes with the Business of the Company.” The employment agreement stipulated that the parties arbitrate disputes. The parties entered into the employment agreement commensurate with an agreement for the Employee to sell the business to the new employer. Unlike the Employment Agreement, the agreements related to the sale of the business did not contain an arbitration clause.

We all know what happens next. The parties have a dispute over their mutual contract performance and alleged breaches. Seller ultimately accuses the Buyer of misrepresentations intended to induce the sale and a series of other acts inconsistent with the agreement to purchase the company. The Seller sues in state court claiming that the Buyer violated the terms related to the parties’ sale and purchase of the business.

Citing the very broad language of the Non-Compete agreement, the Buyer (Employer) seeks to have the dispute resolved in arbitration in accordance with the Non-Compete agreement, despite the fact that the issues raised in the Seller’s Complaint did not specifically relate to the Employment Agreement or a breach thereof. (See generally Sunsplash Events, Inc., Fla. 4th DCA 2014). The trial court ruled against the Buyer, favoring the argument that the causes of action arose under the agreements to purchase the business (no arbitration clause) and not under the employment agreement (arbitration clause). The appellate court disagreed. In a detailed analysis, the appellate court ruled that the very broad language of the employment agreement was sufficient to encompass the claims Seller brought in the state court. The appellate court found a nexus between the disagreement over the sale of the business and the simultaneously-entered employment agreement. As a result, the appellate court ordered the parties to arbitrate the dispute (rather than litigate it in state court).

Readers of this blog are aware that courts favor arbitration clauses. Generally, courts give very liberal interpretation to arbitration clauses and favor resolving disputes in arbitration whenever the facts allow. In the case noted above, the appellate court surmised that an arbitrator could hear the entire dispute because the issue of whether the Buyer’s alleged fraudulent inducement occurred might also involve a determination of whether the Seller breached the employment agreement. As a result, the arbitration clause of the employment agreement mandated an arbitration proceeding rather than an action in state court.

As for the Chicago Cubs, after a fine season and a triumphant start to the 2015 Playoffs, the journey ended when the New York Mets swept the Cubs in four games to earn a trip to the 2015 World Series.

The take-away is this: the question of whether or not to arbitrate is worthy of discussion with your counsel. In some instances arbitration is required even when not anticipated (or preferred). And if you’re a Cubs fan, there’s always next year. At Burr & Forman we have lawyers throughout the southeast skilled in this area of the law. We do not have attorneys capable of predicting when the Cubs might win the World Series.

Florida Non-Competes: Physicians, Attorneys, Quarterbacks, Oh My…

Regular readers of this blog know that Florida law allows “valid restraints of trade,” under certain circumstances. Those restrictions apply to the employer-employee relationship when written and duly executed in accordance with Florida statutes. These restraints of trade are commonly called “Non-Compete” or “Non- Competition” agreements. There are similar restrictions that can prohibit a departing employee from using a former employer’s trade secrets.

Florida’s valid restraints of trade do not apply to attorneys. As a result, attorneys are not subject to non-compete agreements. Go figure.

Physicians, on the other hand, are often required to enter into non-compete agreements as conditions of employment. Recently a group of Florida physicians asked me whether Florida law recognizes a public policy argument that negates all non-compete agreements attempting to restrain doctors from practicing in the location of their choosing or seeing previous patients. The simple answer is “No,” however the analysis seldom ends there. Generally speaking, there is no statute or case law in Florida that negates the enforcement of an otherwise valid non-compete agreement against a physician or a physician’s practice. (There are cases that have disallowed the agreements, and there are cases in which the physician was found not to have violated the non-compete terms, however there are no cases that courts regularly cite or follow creating a public policy against restricting a physician’s practice after the physician departs from a prior employer.)

So what is a physician to do when she is attempting to relocate her practice or when she hopes to join a competitor? First, and perhaps most obviously, the physician can usually negotiate (read: pay money) to opt out of the non-compete agreement. Many times a physician’s non-compete agreement actually contains the manner and costs associated with the buy-out provision. The second vehicle to challenge a physician’s non-compete agreement is on the grounds of the definition of the reasonable restriction of geographic area. Some patients will travel great distances to see their doctor. The more specialized the physician’s practice, the more likely a court will recognize the need for a greater geographic restriction. (At the same time, the more specialized the physician’s practice, the more likely the physician can argue that an actual public policy concern justifies a court’s decision to allow an argument to render the non-compete void.)

What we have found over the years is that physician practices are not shy about enforcing non-compete agreements with departing physicians. At the same time, nearly all of these physician practice groups are far more interested in resolving these issues through (financial) negotiations than through the continuation of litigation. Either way, the law in this area is very nuanced and fact-specific. As with all non-compete cases, Florida courts are obligated to construe the written, executed agreements according to their plain terms, interpreting all ambiguities in favor of unrestricted employment.

Quarterbacks are entirely different. The typical non-compete comes in the form of untimely interceptions. As a life-long NY Giants fan it’s important to recognize that losing the first two regular-season games when holding a double-digit lead in the fourth quarter is simply non-competitive. This despite Eli Manning’s contract extension that included a guarantee of more than $60 million. Fortunately, the Giants held their fourth quarter lead in the third game. That’s more competitive. Note to Eli: please stay healthy. And Eli, if you suffer an injury, consider receiving your treatment down in Florida. We have some seriously great physicians here. They’re very competitive.

Tom Brady, Deflategate, and Florida Non-Competes

On far too many levels, Tom Brady is a star. “Deflategate” or not. Whether he actively participated in deflategate, passively participated in deflategate, or did not at all participate in deflategate, Tom Brady is a star. He belongs in the Hall of Fame. The committee no-doubt will vote him into the Hall of Fame at his earliest eligibility. He’s earned it.

Brady is competitive. No one questions that Brady’s competitive drive is one of the many keys to his continued success and longevity. Indeed, the well-known fact that Brady is competitive has caused many pundits to presume that he was either actually aware of the deflated footballs or was simply experienced enough to greatly suspect something was awry. Competition drives athletes.

Competition also drives successful businesses.

Free trade, in theory, increases competition. Competition forces innovation, higher productivity, better quality, lower prices or some combination of these elements to allow the marketplace to provide suitable options for everyone. Americans embrace competition. Americans reward competition. Our legal system is intentionally set up as an “adversary system” that demands competition.

Florida law recognizes this.

Florida law also recognizes an individual’s freedom to enter into contracts. When it comes to employment, Florida is called “at-will”. That means, essentially, that as long as you don’t violate Florida or federal discrimination laws (or the company’s internal employment rules or agreements), an employer can terminate an employee at any time, for any lawful reason. As anyone familiar with this blog also knows, Florida law also allows “valid restraints of trade” with regard to employment under certain circumstances found among Florida’s anti-trust statutes. The more common phrases for these valid restraints of trade are non-competition agreements or non-compete agreements. In Florida it is lawful for an employer to have the employee enter into a non-compete agreement as a condition of employment. Even a long-term employee can lose her or his job if the employer demands the execution of a non-compete agreement and the employee refuses to enter one. These Florida statutes neither apply to everyone, nor do these statutes apply equally. Florida law distinguishes among employees, allowing longer periods of non-competition for upper level management. As you might expect, Florida law also mandates that the restraint from future employment is reasonably intended to protect the employer’s legitimate ongoing business interests. Because Florida courts generally favor competition over restraints of trade, all Florida non-compete agreements are strictly construed. As a result, it’s critical to involve an experienced attorney when drafting or reviewing a non-compete agreement.

Tom Brady is one seriously competitive quarterback. Nearly every team in the NFL would substantially improve with Tom Brady under center. What if you’re the best at your position? What if you’re the Tom Brady of your profession? What if your competitive nature resulted in your success beyond even your employer’s wildest dreams? Does Florida law allow an exception? Yes and no. Lawyers are not subject to Florida’s restraint of trade statutes. (Go figure.) However Florida’s “valid restraint of trade” laws apply to doctors and nearly all other employees.

Brady is exceptional in many ways. Fortunately for football fans, deflategate suspension or not, Brady’s competitive spirit remains unrestrained.

Florida Non-Competes and the NCAA Tournament Sweet Sixteen

After a wild weekend of some predictably close games and some stunning upsets, the original 68 teams vying to play among “bracketology’s” fortunate 64 are now whittled down to the sixteen teams left standing. The President of the United States picked Villanova to play deep into the tournament. Alas, a scrappy NC State Wolfpack team knocked out the Wildcats from Philadelphia over the weekend. Nonetheless, many of the powerhouse teams remain, including Wildcats from both Kentucky and Arizona. If you prefer other animals, you can always root for Badgers, Bruins or Cardinals. Pugilistic and militia team names are also available. Indeed, unlike many years loaded with animals of various color, this year’s Sweet Sixteen hosts Fighting Irish, Mountaineers, Spartans and Tar Heels. If you’re feeling Devilish, a blue variety plays against Utes later this week.

Only a few more days of college basketball remain before a Monday night in early April when one team will earn the National Championship. All other teams will end their season with a loss. For many coaches, advancement in the NCAA Tournament guarantees another year of coaching at their present school (and possibly a hefty salary increase). For coaches interested in moving to different schools, nothing says “I’m ready!” quite like taking a Cinderella team deep into the three-week national obsession called March Madness.

Yes, the free flow of commerce (specifically the free flow of human commerce in the form of transitioning college basketball coaches) is alive and well in NCAA basketball. On the other hand, for anyone who regularly follows this blog, you know that Florida law allows employers and employees to agree in writing to restrict their future employment in direct competition to the current employer. Can you imagine if college basketball teams enforced non-competition agreements among coaches? Sure, it’s unlikely that coaches at the nation’s premier programs would want to leave their schools. Winning programs attract the best available recruits. The best recruits often create the best future teams. The circle of winning continues. The fan base increases, as does the coach’s salary. Why ever leave?

The same is true for your business. If your employees find themselves at the top of the pay scale and performing at their peak, they may not want to leave. Of course ̶ as you likely know already ̶ your competitors typically seek only your finest employees. And like college coaches, reputation and salary generally drive either the desire to stay at a current position and company, or a desire to display talents from a different arena.

Florida law allows for an avenue to protect businesses from poaching competitors and the losses incurred with departing employees. Florida courts will strictly enforce written, duly executed non-compete agreements among Florida employers and employees. Although there is no statutory format for the actual non-compete language, Florida law has specific boundaries within which a court considers the validity of a non-compete agreement. In very basic terms, Florida law allows increased restrictions on future employment on higher level employees and business owners selling their businesses. Lower level employees entrusted with a company’s trade secrets can also expect future employment and data-use restrictions, however the length of the employment restrictions is typically less than with executives or with employees in management.

At Burr & Forman LLP we have attorneys in nine offices throughout the Southeast knowledgeable in this area of the law. Whether your business needs help drafting a non-competition agreement or enforcing a non-competition agreement, it’s important to seek competent counsel experienced in this area of the law. In the meantime, employers should take solace that only sixteen teams remain in the NCAA tournament. That fact alone will greatly increase productivity from last week… even if your alma mater is a Cinderella with a coach soon to depart for a more lucrative coaching opportunity.

New Year’s Resolution: Review Non-Compete

With the holidays around the corner, college football “Bowl Season” ramping up, and the singing of Auld Lang Syne within earshot, many employers not in the retail or travel businesses are wrapping up 2014 and preparing to start off 2015 with a strong first quarter. Some businesses shut down for the week between Christmas and New Year, understanding that many employees plan either to travel to family or to otherwise take long-saved vacation time. The New Year is sure to bring many changes. Congress will have a new look for at least another two years and the economic uptick across most industries not related to oil production is expected to continue to drive the economy forward in its recovery.

As a result, for most business leaders, the outlook for 2015 is positive. Employers also know that positive growth conditions can lead to competition among employers for the best employees. To complete the circle, competitive companies often court the most marketable employees during periods of economic growth. And so we get around to non-competition agreements and the question of whether or not your company’s non-competition agreement can give you a competitive edge when the economy’s opportunities call on your best and brightest.

To start with basics, it is important to understand that in almost all circumstances state law governs the legality and enforceability of non-competition agreements. In Florida, for instance, the legislature has penned a statute that defines the circumstances in which an employer can contractually restrain its current employees and the parameters that courts interpreting Florida law can use to determine the enforceability of a non-compete agreement. Not all states allow these agreements. Many states limit the agreements to certain professions.

Presuming you come from a state whose laws allow agreements that restrict the future employment of former employees, the end of the year is usually a great time to review the parameters of any in-place agreements and to work with your counsel to prepare an enforcement strategy… just in case. Keep in mind that non-competition agreements vary widely both in their complexity and in the length of their term. Some non-competition agreements allow the departing employee to essentially buy their way out of the restrictions. Others simply discuss an area and time frame in which the departing employee cannot compete.

However complicated your agreement, it is always best to develop your enforcement strategy before an employee departs. At Burr & Forman we have attorneys in offices throughout the southeast with the experience to help you develop your non-competition agreements, your enforcement strategy, and — when necessary — to take legal action for enforcement.

Non-Competition Agreements: Black Friday, Cyber Monday or Bust

This is one of those funny calendar years where Thanksgiving tucked itself deep into the month of November, leaving far too little time for people to contemplate the upcoming holidays and whether or not it’s actually appropriate to wear that 1980’s – style sweater to the office. (As an aside, you may have convinced yourself that your sweater still fits. Office tip: it doesn’t.) So here we all are, scrambling to make the perfect Thanksgiving celebration, wondering how we’re going to complete the year’s remaining tasks before year-end, and otherwise scrambling like we have in virtually all previous holiday seasons. Yes, this is the perfect time of year to practice the annual ritual of attempting a moist turkey using a never-before-tried recipe. If you’re an employer, this is also the perfect time of year to look at your company’s non-competition agreement and how you might enforce it. As with all of these blogs, it’s important to note that ̶ generally speaking ̶ each state has its own rules and laws on the legality and enforceability of employer/employee non-competition agreements. In Florida, the legislature has created a statute specifically on point (hidden as it is among other laws discussing “restraint of trade”). Under a defined set of circumstances, Florida law allows an employer and an employee to enter into a non-competition agreement that limits for a period of time a departing employee’s ability to directly compete with the former employer. Some states specifically disfavor these restraints of trade. Some states allow an employer and employee to enter into a non-competition agreement without the benefit of having a statute on the matter to help define the allowable scope of such an agreement. On Black Friday and Cyber Monday retail stores around the nation and across the internet severely discount their products and services in order to attract customers and in an effort to turn their fiscal year profitable. It is the ultimate competition for consumer dollars. Similarly, businesses of all types are also using the final month of the calendar year to maximize collections and increase annual profits. For many employers this is also a time to contemplate whether and in what amount employees will receive annual bonuses. Knowing this, many employees wait until after their employers distribute bonuses to inform the employer that the employee intends to soon start working at a competitor. For many employers, this is the first time all year that will they look at the terms of their non-competition agreement and attempt to determine whether or not the terms are easily enforceable against the departing employee. However, just like the retailers who plan far in advance for Black Friday and Cyber Monday, employers should also take this opportunity to look over their agreements to determine ̶ in advance ̶ the best corporate strategy for enforcement. Some agreements include a devaluation of company stock for departing employees. Some agreements forbid competition for a defined period of time within a restricted area. Keep in mind that states tend to strictly interpret non-competition clauses. When terms are not clear, courts usually give the benefit of the doubt to the employee, favoring free competition whenever possible. Just like with Black Friday and Cyber Monday, it’s difficult to know in advance whether or not your strategy will pan out. To give your company the best shot at success, it makes sense to look over your options in advance.

Burr & Forman attorneys in nine offices throughout the Southeast are available to consult with you on these issues, to develop your strategy, and to work with you when the need to enforce arises.

Halloween Scares and Non-Compete Agreements

Halloween is always a great time for adults and children. Just think about it, for at least one night we intentionally abandon every notion we teach our children about taking candy from strangers, not acting deceptively, not scaring people unnecessarily and otherwise not acting like little hellions. Indeed, we encourage the opposite. Scary little monsters will roam my neighborhood seeking free candy from strangers who often try to frighten them. Under the pretense of nonchalance, parents will watchfully keep a respectful distance from all front doors as their children boldly explore what an unknown witch or werewolf might hand out as “trick” or “treat.”

And so it goes this season all around our great nation.

And so it goes in many an employment agreement as well. Many of our clients require their employees to execute a non-competition agreement as part of their continued employment. While not all states favor agreements that restrain trade (some essentially disallow non-competition agreements altogether), Florida has detailed statutes spelling out the requirements of a valid non-competition agreement and many cases considering the issue to help all parties involved determine how best to deal with a departing employee.

What remains unclear is whether or not the non-competition agreement in force is a “trick” or a “treat” to either the former employer or to the former employee, or to neither. The answer is that it depends on the circumstances. Florida law recognizes that under certain circumstances an employer has the right to protect its trade secrets, its customers and its remaining employees from the competition of departing employees. While this sounds as if it solely favors the former employer, under many circumstances the situation is ̶ to keep with the theme ̶ more tricky. Often the customers whom the former employer seeks to insulate prefer to continue to work with the former employee. We’ve seen circumstances where customers of the former employer actually pull their business because the former employer has initiated legal action against a former employee pursuant to a seemingly enforceable non-competition agreement.

So what is an employer to do? Remember Halloween. Even when it’s seemingly okay to “trick,” sometimes it’s better to offer a “treat.” In a recent matter, the former employer had a stock repurchase agreement in force for departing officers and managers. The repurchase agreement had a formula that discounted the share value for departing employees. The former employer also informed the departing employee that it intended to enforce the (rather restrictive) non-competition agreement. However, when the former employers’ customers complained about losing the person with whom they had forged a professional relationship, the former employer opted to enter into a consulting agreement with the departing employee rather than to initiate a lawsuit. The benefits of this were many and obvious. First, the former employer could mollify its customer and maintain continuity on the job. However additional benefits also resulted. For one, the former employer could both keep tabs on the former employee (and its customers) and at the same time profit from the continued relationship. A supplemental benefit was that it made any violation of the parties’ agreement other than through the consulting agreement seem all-the-more egregious. In that way, if the matter ever made its way to a courtroom, at least the former employer could argue that it took every possible step to act reasonably.

You might find yourself in a circumstance when there are better business alternatives available than simply initiating litigation to enforce a non-competition agreement. Even though it’s the Halloween season, don’t be scared. At Burr & Forman we have lawyers in offices throughout the Southeast that are experienced with these issues and able to advise you in even the most scary situation.

Derek Jeter Retires: Can He Compete?

For two decades Yankees fans and baseball aficionados everywhere have reveled in Derek Jeter’s statesmanship and poise. Jeter exemplified leadership. Despite having played alongside several teammates embroiled in controversy, Jeter remained above the fray. He spoke with his bat. He spoke with his glove. His ability to keep his tongue spoke loudly enough for all to hear. He was, as all baseball fans know, a fierce competitor. Yankees fans around the globe imagine a day when Jeter might return to the organization. Will he coach? Will he manage? Will he run the front office?

Jeter is not the first employee to retire after years of dedicated and valuable service. Nor is Derek Jeter a typical employee.   If a professional baseball team offered Derek Jeter the job of Manager ̶ any baseball team ̶ Yankees fans would likely collectively say “Good for you, Captain.”

This author is unaware of any instance in which a retiring baseball player was subject to a non-competition agreement. However not all successful retiring employees in Florida face as easy a path to continued success. Readers of this blog are well aware that under defined circumstances Florida law allows employers and employees to negotiate non-competition agreements that can restrict for a limited period of time the former employee’s future employment. Under Florida law, an employer and its employee can agree on future restrictions pertaining to location, specialty and time period. An employer and its employee can agree on what information constitutes a trade secret and on limitations to the former employee’s use of the employer’s trade secrets.

Can you imagine the trade secrets an athlete like Derek Jeter must possess? Insight on the various pitchers throughout the league could prove invaluable to a Yankees competitor. Jeter’s insight into the Yankees organization itself could prove invaluable to a Yankees competitor. Sure, professionals throughout baseball command high salaries to possess just such insight.   Professional scouts abound. Each Manager is aware of the characteristics of nearly every other player in the league. And yet how many of them has faced a 97 MPH fastball and deftly flicked it into right field with a runner in scoring position to win the game?

It’s true, an employer and employee in Florida can agree on limitations to the employee’s future employment upon his or her departure from a current job. If you’re subject to non-competition agreement in Florida and are restricted from working in your chosen field for a period of time, you need not panic. Rumor has it that a job is now available in the Bronx. The Yankees need a shortstop.

On the other hand, if you lack that particular talent and need legal advice on Florida non-competition agreements, make sure you call an attorney experienced in this area of the law. At Burr & Forman we have attorneys in nine offices throughout the Southeast experienced in dealing with these issues. And yes, Derek, we also need a shortstop…

Joan Rivers and Non-Competition Agreements: Can We Talk?

Sadly, Joan Rivers ̶ the famous comedienne who was perhaps best known for sitting down with celebrities and asking “can we talk?” ̶ died recently at the age of 81. Ms. Rivers’ self-deprecating nature and ability to use laughter to put people either at ease or to otherwise coerce them to divulge information often resulted in her getting the scoop. This unique ability allowed her to remain popular and visible for decades. And how, you might ask, does Ms. Rivers’ story relate at all to Florida non-competition agreements? To borrow a phrase: let’s talk.

If you have followed this blog (or merely happened upon it through an internet search) you likely already know that under Florida law the legal bases for non-competition agreements are found in the statutes under the name “Valid Restraints of Trade.” After all, that is exactly what a non-competition agreement does: it restricts, for a defined period, a former employee from working in a field that might compete with the former employer. The result is a “restraint of trade,” which is to say an obvious restriction on the future employment of the former employee. If drafted properly, a non-competition agreement is legally enforceable against the former employee. The question is: Does it always make sense for a company to litigate a potential violation of an otherwise valid non-competition agreement?

This is certainly a topic worthy of serious discussion. Courts strictly enforce non-competition agreements. When interpreting any ambiguities within these agreements, courts are also compelled to reach an interpretation that favors the former employee’s right to unrestricted work. This is an important factor to consider, because almost all non-competition agreements include a provision for the prevailing party in any enforcement action to have the losing party pay its attorneys’ fees and costs. As a result, what might look like a very strong case for a company against a former employee for violation of a non-competition agreement can turn into a prolonged and expensive battle over potential ambiguities in the agreement.

And now the benefit of talking: Ask yourself why your company wanted its employees to execute a written non-competition agreement. Did the employee’s potential departure pose a unique business risk to your company? Ask yourself what exactly it is you want to protect. Is there a specific trade secret at risk? Is there a client relationship at risk? If the overarching reason for the non-competition agreement is a client relationship, then consider whether the client will react positively to knowledge that your company initiated an action to enforce its non-competition agreement, thus potentially keeping the client from working with someone familiar? Once you answer these and any other relevant questions regarding the need and origin of your non-competition agreement, ask yourself one more. Ask yourself: “What is in the best interests of my company right now?” If, after consulting with your legal counsel and the company decision-makers, you remain confident that the best strategy is to quickly file an enforcement action, then the best thing to do is to secure competent counsel and to work with counsel to immediately set a company budget line-item specifically intended to fund the effort. On the other hand, sometimes the best thing about having your employees execute a valid non-competition agreement is your ability to negotiate a reasonable pay-out at the time of the employee’s departure. If you decide to negotiate instead of seeking to enforce, then the manner in which your company can benefit is often limitless. This is also the time when you can exercise an extreme amount of corporate creativity. Will a simple cash pay-out accommodate whatever pecuniary loss your company anticipates with the employee’s departure? Will your company benefit from entering into a joint venture agreement with the departing employee (presumably on favorable terms)? Is there a realistic opportunity to protect existing client relationships in the absence of the former employee? What is the value to the former employee to continue to work with your company’s (otherwise restricted) clients and contacts? In other words, talk it out within the company. You might discover that early interventional negotiation you will better serve the company’s overall goals than an often-unpredictable legal battle.

And so, back to Joan Rivers, sometimes it’s best to ask: “Can we talk?” Litigating a non-competition claim certainly sends a message to all departing employees that the company is willing to seek strict enforcement of its employer/employee agreements. It’s just not always your company’s best legal strategy.

This blog ends, like most others in this series, with some advice. When it comes to a decision of how to enforce a non-competition agreement, to drafting an enforceable non-competition agreement, or to litigating over the validity of a non-competition agreement, it’s necessary to arm your company with competent legal counsel experienced in these matters. At Burr & Forman we have experienced attorneys throughout the Southeast ready to address your questions and concerns.

Arbitration Panel Misconstrues Contractor Licensing Law: Court Allows Decision to Stand

If you’ve followed Burr’s e-note over the past year or two, then you know that the United States Supreme Court has issued recent opinions on the power of arbitration tribunals to make legal decisions.  Even if a review of the arbitration decision reveals an error in legal interpretation, the general rule of the land is that parties who contractually agree to resolve their disputes through arbitration accept the possibility that the arbitration panel may interpret the law or the facts (or both) in a final opinion that is very difficult to overturn on appeal.  A recent Florida appellate opinion on contractor licensure emphasizes this nuanced area of the law.

As background, Florida law is clear that a contractor unlicensed at the time of contract cannot maintain an action in a Florida court for unpaid work.  See 489.128(1), Fla. Stat. (2009).  Florida courts strictly construe these statutes.  As a result, litigants in Florida courts can anticipate that an entity that was technically unlicensed at the time it entered into the contract will have an uphill battle in a court of law trying to collect for unpaid work.

We also know that many construction contracts contain arbitration clauses.  A recent case from Florida’s Third District Court of Appeal wrestled with the conundrum of determining whether it had authority to overturn the decision of an arbitration panel that appeared to misconstrue Florida’s unlicensed-contractor law.  The Village at Dolphin Commerce Center, LLC v. Construction Service Solutions, LLC (Fla. 3rd DCA 2014).   In Construction Service Solutions the undisputed facts at arbitration showed that the contractor was not technically licensed under Florida law at the time of the contract.  Despite the fact that during the term of the contract the contractor cured the licensure defect, Florida law typically bars a contractor’s action for recovery of unpaid work when the licensure requirements were not met at the time of the contract.  The record also showed that neither the contractor nor the owner objected to the arbitration panel’s jurisdiction or authority to decide the issue.  If either side objected to the arbitration panel’s jurisdiction to decide the licensure issue, the AAA Construction Arbitration rules required the objecting party to object in the answering statement.  Both parties agreed to allow the arbitration panel to consider the issue.

Ultimately, the arbitration panel ruled in favor of the (technically unlicensed) contractor.  Unhappy with that decision, the owner sought a ruling from the Florida trial court seeking to overturn the panel’s decision.  The trial court refused.  Still unsatisfied, the owner appealed to the appropriate Florida appellate court.  The appellate court noted that Florida law would typically bar the contactor’s recovery.  Nonetheless, the appellate court further confirmed and upheld the arbitrator’s decision.

The Owner also argued that the arbitration panel had improperly neglected to consider the issue of the contract’s legality.  In the courtroom, the Owner argued that either (a) the parties never agreed to submit the lien claim to arbitration or (b) the arbitration award did not address the Owner’s affirmative defenses.  Id.  The Third District, however, agreed with the magistrate, holding that the enforceability issue was submitted to arbitration when the Owner filed its answer and raised enforceability as its first affirmative defense.  In its initial arbitration response, the Owner failed to dispute the scope of the arbitrator’s authority to decide the issue.  Id.

Despite an arbitration result that appeared to misconstrue Florida law, the Third District held that the parties willingly submitted to the arbitrator the issue of whether or not the contractor could legally enforce the contract.  Having chosen their preferred venue for dispute resolution, the parties were bound by the results.  And this isn’t a particularly unique position for Florida courts.  While the Florida Arbitration Act allows a court to review an arbitrator’s decision if the arbitration panel exceeded its authority, see Fla. Stat. § 682.13(1)(d), the Florida Supreme Court has refused to disturb an arbitration award for a “mere” factual or legal error.  See Schnurmacher v. Noriega  (Fla.1989).  The U.S. Supreme Court, not surprisingly, takes a similar stance.  SCOTUS’  well-known Buckeye Check Cashing, Inc. v. Cardegna (2006) opinion distinguishes challenges to the validity of an agreement to arbitrate from challenges to the validity of contractual interpretation.

The lesson is clear:  when agreeing to arbitrate a dispute, when responding to a demand to arbitrate, or when filing your formal response to an arbitration petition, it is imperative to analyze the scope of the arbitrator’s authority and to ensure the scope is in line with your client’s interests.  The other lesson, of course, is to make sure your lawyer knows this.  At Burr & Forman we have nine offices throughout the Southeast staffed with attorneys who routinely navigate these issues.