A recent non-compete dispute in Florida raises questions about the concept of legitimate business interests under Florida law. Until October, prominent Florida chef Domenica Macchia ran the kitchen at a St. Petersburg restaurant called Three Birds Tavern. After leaving Three Birds last fall, Macchia became the chef at another local restaurant called Beak’s Old Florida. As it turns out, the chef had an agreement with Three Birds (and its owners) that prevents her from working at competing restaurants in Pinellas County, Florida through 2014. Last week, the owners of Three Birds filed a lawsuit against Macchia in Pinellas County Circuit Court alleging that the chef breached her non-compete agreement.
Many laypeople and lawyers would insist that the agreement in this situation is reasonable and should be enforced. Quite often, their argument is based – at least in part – on the general principle that contractual bargains must be upheld. There is a certain reverence for contract underlying many of these cases. After all, a deal is a deal and the courts must hold people to their bargains. Such logic, of course, ignores basic legal principles of both contract and competition law. Simply put, courts do not enforce illegal contracts. And a contract need not involve a murder-for-hire plot to be rendered illegal. I am, of course, beating that antitrust drum again. No court would opine on the importance of upholding an agreement to fix prices or to eliminate a competitor through destroying their merchandise.
Most practitioners with any experience in this realm understand this. They understand that the United States has antitrust laws. The Sherman Act, in particular, renders contracts, combinations and conspiracies in restraint of trade illegal. States also have their own antitrust laws. Non-compete agreements are an exception to these laws. In Florida, the non-compete statute is found at F.S. 542.335. The entire chapter – 542 – is known as The Florida Antitrust Act of 1980. As such, the principles governing non-compete agreements in Florida are spelled out as limited exceptions to antitrust law. Florida uses a legitimate business interest test. The upshot of all this: Absent a legitimate business interest, a non-compete agreement is unenforceable, period.
I know that it sounds like I am just stating the obvious. But I have dealt with more than one in-house attorney (and a number of business people) who assumed that because they had a non-compete agreement, that agreement was automatically enforceable. Not so. At least in Florida, an agreement not to compete falls in the same category of illegal contract or conspiracy unless it is necessary to protect a legitimate business interest. The question, then, is whether or not a non-compete agreement is necessary to protect a restaurant when a prominent chef jumps ship and goes to work for another restaurant across town.
There are no trade secrets at issue. There is no confidential information. There are no unique customer relationships, because restaurant patrons frequent many different restaurants. The plaintiffs could attempt to stretch the Florida non-compete statute to protect other relationships in the industry, like those with vendors or suppliers, but they will lose on that one, too. It is black letter law in Florida that supplier relationships are different than customer relationships and cannot be protected through non-compete provisions. That leaves extraordinary education or training, and the plaintiff fails there as well. Macchia was a well-known chef when she took the job at Three Birds. Although the Florida statute is illustrative not exhaustive, it seems like the plaintiffs have very little room to maneuver. We’ll see what the Florida courts have to say.
Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida. He focuses his practice on cases involving employment disputes, antitrust and business torts. He has a particular interest in non-compete agreements. He represents clients in Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Jupiter, Fort Myers, Tampa, and Orlando.
Hi Jonathan, I think I may disagree with you on some of your assumptions, but not on your ultimate conclusion that this clause should not be enforced against the chef. I have stopped eating at certain restaurants and followed a good chef to his / her next job, at the expense of the first restaurant. And, there could be trade secrets in the form of recipes, techniques,etc., even confidential contract discount pricing of food ingredients that are within the knowledge of the chef.
But, even if true here, these factors would support the enforcement of a confidentiality agreement, not a non-compete agreement, which is a far more drastic, over-broad and restraining an instrument to protect the former employer. If there are any public policy issues here, they are the policies favoring a competitive labor market allowing people with skills to move to new employment where they have higher value, and the policy favoring robust quality competition between firms for customers. The chef’s employers are naive if they think that a really good chef is not going to get better offers at some point. Even worse, they should not be able to stifle competition for highly skilled people by writing a clause in a contract that compels someone to leave the county for two years. That just screws consumers and protects employers from a reasonable risk of doing business. Like I said, if there were serious IP or trade secrets involved, and the plaintiff can show that disclosure to a competitor will cause serious competitive injury, I might go the other way on this one. Or not.
Steven— I always appreciate your thoughtful comments. Thank you! First, in my view, the fact that some restaurant patrons may follow a chef does not create a protectable interest, at least not under Florida law. When courts step in to protect customer relationships, they most often do so based on some evidence that the defendant has attempted to steal those customers— he has stolen customer lists, sollicited customers, etc. I don’t see the same facts playing out in a restaurant/chef non-compete case.
With respect to confidential information, you have a very good point re recipies and techniques etc. I can see how some recipies could be considered confidential information or even trade secrets. So I stand corrected on that point. That said, I still think arguments re confidential information and trade secrets are subject to attack, both in this specific case and in the industry at large. Macchia was at the original restaurant for maybe a year. Now she’s at a restaurant that has a completely different menu. I haven’t heard anything suggesting she took files or recipies with her or is copying them in her new role. And I don’t think this is a case of inevitable disclosure. Beyond that, the industry at large is just so fluid and transient. So many people move in and out of restaurants all the time. In fact, I would wager that there are likely other people who worked at Three Birds, who also had access to such allegedly confidential information, and who did not sign anything (whether non-compete agreement or confidentiality agreement). I don’t buy it.
But in the end, I take the same line as you— If there really were trade secrets at issue, then I might be ok with a non-compete agreement here. But absent that, this is just anticompetitive— a naked restraint of trade that does not serve any legitimate purpose.