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.

Alabama’s New Non-Compete Statute: Are You Ready For New Year’s Day?

Those involved in drafting, negotiating, or litigating covenants-not-to-compete in Alabama have long known that Alabama’s statute books seldom provide ready answers on this particular topic.  The text of current Alabama Code § 8-1-1, entitled “Contracts restraining business void; exceptions,” was — until this year — last amended in 1940.  This text consists of three short paragraphs and does not delve into details.  As a practical matter, this has meant that, for the past 75 years, it has been up to Alabama courts to fill in the details.

This is about to change.  On June 11, 2015, Governor Bentley signed into law House Bill No. 352, entitled “Contracts, use of restrictive covenants clarified, Sec. 8-1-1 repealed.”  The new law comes into effect on January 1, 2016 and repeals all of current Alabama Code § 8-1-1.

At least in some respects, the provisions of the new law mirror what Alabama courts have already been doing.  This codification of previous court outcomes into Alabama’s statute books should help to provide clarity when drafting, negotiating, and litigating future agreements.  In other respects, though, the new statute innovates.  As a result, employers will want to pay close attention to the new law and make sure that their existing agreements comply with the law.

The old and new laws both begin by stating the general rule that contracts restraining anyone in the exercise of a lawful profession, trade, or business are void.  However, the new law now enumerates, in detail, the exceptions to this general rule of voidness.

Section 1(b) of the new law lists, as exceptions, six categories of contracts that “are allowed to preserve a protectable interest.”  Of interest to employers, sub-items 1(b)(4) and 1(b)(5) include, within these exceptions, non-competition and non-solicitation agreements entered into between a “commercial entity” and an employee of that entity.  In other words, non-competition and non-solicitation agreements entered into as part of the employment relationship might be valid under Alabama law, but only if the agreements “preserve a protectable interest.”

Section 2(a) of the new law defines “protectable interests” so as to include not just “trade secrets,” but also “pricing information and methodology,” “customer lists,” “business models and data,” and “contacts with specific prospective or existing customers,” among others.  However, Section 2(b) says:  “Job skills in and of themselves, without more, are not protectable interests.”  As a result, employers seeking to enforce a non-competition or non-solicitation agreement will need to pay close attention to the list of “protectable interests” in Section 2(a).

For prohibitions on competition after the end of employment, the new law states that a restrictive covenant of “two years or less” in duration will be presumed reasonable.  This two-year period is, on the whole, consistent with Alabama court decisions over the past 75 years.  However, the new law then provides a shorter “presumptively reasonably” time-period (usually 18 months after the end of employment) for agreements prohibiting the solicitation of the employer’s customers.  These differing presumptions for non-competition and non-solicitation agreements are one of many reasons why Alabama employers may wish to review their non-competition and non-solicitation agreements for compliance with the new law.

New Year’s Day 2016 and Alabama’s new law are coming soon.  If you are an employer and have questions about how Alabama’s new law might impact a specific agreement your business uses, please feel free to contact a member of Burr & Forman’s “Non-Compete and Trade Secrets” team for additional information.

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.

The Multi-State Non-Compete Agreement “Drilled Down”

Our February article addressed the options available to the multi-state employer attempting to design its non-compete agreements within the “tangled mess” of the various state laws applicable to agreements for employees who reside within those various states. In that article, we advised that unless management has the resources to design, update and manage separate agreements tailored to each applicable state law, the best alternative is to design an “asset protection program” to include as few versions of the agreement as possible, tailoring each version to as many, similar state laws and job categories as possible. In this and subsequent articles, we will dig deeper into the variety of business and state law issues involved in this process.

Initially, employers should identify all employee/independent contractor responsibility levels and titles to be covered by the company’s non-compete agreements and the states in which those employees/contractors reside. Here, it is important to note that most state laws will not support the enforcement of a non-compete covenant unless the employer has a material, protectable interest supporting its post-employment non-compete restrictions. Translated, this means that most state laws will not support the enforcement of non-compete or even customer non-solicitation covenants signed by non-supervisory, non-sales and non-managerial employees. So, don’t expect to enforce a non-compete or non-solicitation covenant when it comes to your administrative assistant or your production employees. Furthermore, a detailed analysis of each employee category in the context of applicable state laws as opposed to a “one-size-fits-all” agreement will aid in the enforcement process. By way of example, it may be ill-advised to include non-compete and customer non-solicitation covenants within the agreements designated for North Carolina-based scientists because such scientists do not have access to customers or secret formulas which could be damaging if they leave for a competitor. In states such as North Carolina where the enforcement of a non-compete or customer non-solicitation is somewhat unpredictable, a good solid confidential information covenant may be preferred.

Along these same lines, this first step will also pave the way for other critical discussions with your counsel. The four primary types of employee restrictive covenants – the non-compete, customer non-solicitation, employee non-solciitaion and confidential information covenants – have varying applications depending on the nature and level of employee to which the agreement is directed. Each occupies what could be described as a “sliding scale of enforceability. Non-compete covenants which, to some degree or another, restrict a former employee’s subsequent employment in the industry are the most difficult to enforce, followed by the customer non-solicitation, the employee non-solicitation and finally, the confidential information covenant. As such a careful categorization of targeted protectable interests for each employee category and the state laws involved for each will help ensure enforcement and reduce the number of agreement versions your Company is required to manage and update.

We will expand on this analysis in future articles, taking a closer look at other key components of this analysis including adequate consideration, blue-penciling laws and the non-compete versus non-solicitation analysis.

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 Continued: the Multi-State Non-Compete Agreement

With (most of) 2015 ahead, it is an opportune time to continue with our theme of employee non-compete agreements and resolving to review, assess and update your company’s agreements as a critical component of your ongoing and vital asset protection program. It goes without saying that an otherwise good start to the new year can come to an abrupt end when the company learns that a valued employee has “jumped ship” to the competitor because she knew what we didn’t; that her non-compete agreement with our company was outdated and no longer worth the proverbial paper on which it is written.

If your company employs individuals in two or more states, your “starting point” for this project is different (and more complex) from that of the Company which employs individuals in just one state. The underlying premise is one with which you are probably familiar; the laws surrounding the enforcement (or lack thereof) of non-compete agreements are matters of varying state, not federal law.

Assuming your Company has the financial and human resources to draft, implement, monitor and amend non-compete agreements tailored to the specific laws of each state in which it employs individuals, that is likely your best option. State-law tailored agreements which can be monitored and kept current with the ever changing legal landscape undoubtedly increase the likelihood of enforcement – at least in the short term. But, this is a very time consuming and expensive process that often, for legitimate reasons, falls by the wayside. While multi-state employers start out with great intentions and often spend a significant amount of money and time on the front-end of this project, higher priorities take over and these tailored agreements are rarely monitored in accordance with and therefore left victim to ever-changing state laws.

Most multi-state employers take a different route; limiting the number of versions of their non-compete agreements to one or very few. Certainly, from contract management, assessment and enforcement perspectives, one or a very limited number of versions lends itself to a more manageable program. That said, the drafting and enforcement of standardized, multi-state, non-compete agreements can also be a very complex and somewhat treacherous mine field of issues, deserving of a significant amount of managerial and experienced legal analysis on the front-end. Most often, the adoption of this type of “non-compete program” involves a detailed analysis of the laws of the states where employees reside, the duties and titles of the employees who will be asked to execute and similar issues. But, in the end, the multi-state employer has a solid foundation for this component of its asset management program for years to come.

We will expand on this analysis in future articles, taking a closer look at its key components including adequate consideration, blue-penciling laws and the non-compete versus non-solicitation analysis.

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. http://www.burr.com/NewsResources/Resources/~/media/EF6EAAB39DEA4277AA841FEA92886D09.ashx

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.

Be Careful What You Ask for: Selecting Forums for Arbitration

On October 2, 2014, the United States Court of Appeals for the Eleventh Circuit rendered its decision in Inetianbor v. CashCall, Inc. A copy of the slip opinion can be found here. Although this case did not involve a non-compete agreement, the Eleventh Circuit’s guidance regarding contractual arbitration provisions may have implications for those drafting and litigating non-competes.

The arbitration clause at issue in Inetianbor was a bit unusual (at least as to the specified forum), but the underlying dispute between the parties was not out of the ordinary. The plaintiff, Mr. Inetianbor, was a Florida resident who borrowed money from Western Sky Financial, LLC. The defendant CashCall, Inc. serviced this loan. Mr. Inetianbor sued the servicer in a Florida court, alleging, among other things, violations of the Fair Credit Reporting Act. After removing the case to a federal court, the servicer then moved to compel arbitration of the dispute pursuant to the terms of Mr. Inetianbor’s loan agreement with Western Sky. This loan agreement contained the following arbitration provision: “You agree that any Dispute … will be resolved by Arbitration, which shall be conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative ….

After the trial court initially compelled arbitration in accordance with this provision, Mr. Inetianbor contacted the Tribe in Eagle Butte, South Dakota. In response, Mr. Inetianbor received a letter from a Tribal Judge stating that the Tribe “does not authorize Arbitration,” but after some back-and-forth, a Tribal Elder was eventually chosen to arbitrate Mr. Inetianbor’s dispute. However, at the preliminary arbitration hearing, the arbitrator explained that “this is a private business deal” and that “[t]he Tribe has nothing to do with any of this business.” When Mr. Inetianbor brought the arbitrator’s statements to the attention of the trial court in Florida, the court was persuaded to reconsider its previous orders compelling arbitration.

The trial court determined that it was not possible to conduct an arbitration in accordance with the parties’ agreement, because the arbitration was not being conducted by an “authorized representative” of the Tribe. On appeal, the Eleventh Circuit affirmed the trial court’s decision. The dispute between Mr. Inetianbor and his loan servicer will now be resolved through judicial proceedings, not through arbitration.

So what does this mean for non-compete agreements? It is probably fair to say that most practitioners have never encountered a non-compete agreement specifying resolution of disputes through arbitration conducted by the Cheyenne River Sioux Tribal Nation. However, employment contracts sometimes contain both non-compete provisions and arbitration provisions. As an initial matter, such arbitration provisions may add additional steps to the process of obtaining injunctive relief from a court when an employer seeks to enforce its non-compete provisions. This said, when the arbitration provisions are enforceable, it is the arbitrator — and not a court — who will ultimately determine the scope and application of the non-compete provisions. The Eleventh Circuit’s decision in Inetianbor underscores the need to pay attention to the forum(s) specified for arbitration when drafting or litigating non-compete clauses subject to arbitration.