New CHOICE Act: Key Impacts on Florida Employers’ Noncompete Strategies

May 3, 2025 By in Uncategorized Leave a comment

BIG NEWS for Florida employers – every Florida employer that uses noncompete agreements needs to take action immediately.

The Florida House and Senate recently passed the “Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act,” which substantially strengthens noncompete law in the state that already had the most employer-friendly noncompete law in the country. Governor DeSantis is expected to sign the legislation, which is set to take effect on July 1, 2025.

Before I summarize the statue, here’s the key takeaway: Any Florida employer that uses noncompete agreements needs to immediately work with an attorney to make sure their agreements fall within this new statute, which makes it far, far easier to enforce a noncompete agreement.

Here is a summary of the key provisions:

The statute applies to Covered Employees, defined as an employee “who earns or is reasonably expected to earn a salary greater than twice the annual mean wage of the county in this state in which the covered employer has its principal place of business, or the county in this state in which the employee resides if the covered employer’s principal place of business is not in this state.”

Covered Noncompete Agreements

The statute allows noncompete agreements of up to 4 years, and there is no statutory geographic limitation. Thus, this statute would apply to a 4-year noncompete with worldwide scope. This goes far beyond the presumptions set forth in Section 542.335, Florida Statutes–the current noncompete statute– and does not have that statute’s requirement that the employer prove that the geographic scope is reasonable.

Covered Noncompete Agreements are enforceable as long as (a) the employee is advised in writing of the right to seek counsel before signing, (b) the employee acknowledges in writing that the employee will receive confidential information or customer relationships during their employment, and (c) if the employee has a garden-leave agreement (discussed below), the noncompete period is reduced day-for-day “by any nonworking portion of the notice period.” The employer must also provide at least 7 days’ notice before the employee signs the noncompete.

Covered Garden Leave Agreements

This statute introduces a new concept that is not present in 542.335, the Covered Garden Leave Agreement. Essentially, this is a forced notice period, under which the Covered Employee must provide a certain amount of notice before leaving their employment. The statute permits notice periods of up to 4 years. During the notice period, the employee would still get paid. Notably, the employer is not required to provide “discretionary incentive compensation or benefits” during the notice period.

Covered Garden Leave Agreements also require 7 days’ notice, advising the employee of the right to seek counsel, and an acknowledgment that the employee will receive confidential information or customer relationships.  There are also more detailed requirements regarding the employee’s rights during the notice period.

Enforcement

The statue provides for strict enforcement. Essentially, courts “must preliminarily enjoin a covered employee from providing services to any business, entity, or individual other than the covered employer during the” notice or noncompete period. At that point, the burden shifts to the employee, who can only get the injunction dissolved if they prove by clear and convincing evidence that (a) they are not in a competitive role, (b) the employer failed to provide the consideration provided in the noncompete agreement “and has had a reasonable opportunity to cure the failure,” or (c) that the employer is no longer in that line of business.  The statute also requires an injunction against the business or individual employing the employee subject to a noncompete or garden leave agreement, at which point the burden shifts to the new employer in the same manner as it shifts to the employee.

Additionally, the statute provides that if the employee engages in gross misconduct, the employer can reduce the employee’s salary or benefits during the notice or noncompete period, without breaching the agreement.

The statute also provides that any restrictive covenant not fitting the definition of a Covered Garden Leave Agreement or a Covered Noncompete Agreement will continue to be governed by Section 542.335. That statute places substantially higher burdens on employers trying to enforce restrictive covenants. For that reason, it is critical for employers using restrictive covenants to ensure that their agreements fall under this new statute.

This is a remarkable statute. It radically changes noncompete law in Florida and is extraordinarily favorable to employers and, frankly, unfair to employees. It also creates a strange situation where nondisclosure and nonsolicitation agreements, which are less restrictive than noncompete agreements, are harder to enforce.

As I mentioned above, any Florida employer that uses noncompete agreements should act immediately to ensure that their agreements comply with this new statue. Failure to do so will make it much harder to enforce those agreements. Feel free to reach out to me if you have any questions about how this affects your business.

New President, New Restrictions on Non-Competes?

January 17, 2021 By in Florida Non-Compete Lawyer, Noncompete Tags: , Leave a comment

President-Elect Biden has made it clear that he intends to seek restrictions on non-compete agreements, an issue that has had bipartisan support in the past. For example, his campaign website says that he will “work with Congress to eliminate all non-compete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets, and outright ban all no-poaching agreements.”

I wrote a column in the Daily Business Review addressing this issue and how companies can prepare for possible national restrictions on non-compete agreements. The column can be found here.

Supreme Court Expands Protections to Companies Providing Proprietary Information to the Federal Government

June 24, 2019 By in Case Summary, Trade secrets Tags: , , Leave a comment

As I’ve written about previously (see here and here), the Supreme Court heard argument earlier this year in a case that implicates trade-secrets issues, Food Marketing Institute v. Argus Leader Media. I covered the oral argument for this blog. Today, the Court entered its opinion, authored by Justice Gorsuch.

In short, this case addressed whether satisfying the Freedom of Information Act’s (FOIA) exemption for “trade secrets and commercial or financial information obtained from a person and privileged or confidential,” requires a showing of substantial competitive harm. 5 USC § 552(b)(4).

As I suspected, the majority (Justices Gorsuch, Roberts, Thomas, Alito, Kagan, and Kavanaugh) answered this question in the negative and abdicated the competitive-harm requirement. Instead, the Court adopted a more permissive test:

At least where commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is “confidential” within the meaning of Exemption 4.

During oral argument, trade secrets came up in the context of one of the appellee’s attempts to justify the competitive-harm test. Argus Leader argued that by referring to confidential commercial information, the statue used a term of art that required treating this information under the then-existing trade-secrets law. Because that law required showing competitive harm, Argus Leader argued, Exemption 4 required the same.

The Court rejected this argument:

Argus Leader points to no treatise or case decided before Exemption 4’s adoption that assigned any such meaning to the terms actually before us: “commercial or financial information [that is] privileged or confidential.” So even accepting (without granting) that other phases may carry the specialized common law meaning Argus Leader supposes, the parties have mustered no evidence that the terms of Exemption did at the time of their adoption.

This opinion aids companies who provide proprietary information to the federal government, as it removes the most troublesome hurdle to exempting that information from FOIA disclosure. But importantly, under the new test, the government must provide an assurance of privacy before Exemption 4 applies. Thus, any company providing proprietary information to the federal government should first receive that assurance.

Supreme Court Discusses Trade Secrets During Oral Argument

April 23, 2019 By in Case Summary, Trade secrets, Trade Secrets In the News Tags: , , , Leave a comment

Yesterday, the Supreme Court held oral argument Food Marketing Institute v. Argus Leader Media, a case involving an exemption to the Freedom of Information Act (FOIA). The Supreme Court’s Public Information Office granted me a press pass to cover the arguments for this blog, since the case involves trade-secrets issues.

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As I discussed previously, the FOIA contains an exemption for “trade secrets and commercial or financial information obtained from a person and privileged or confidential,” which does not need to be disclosed publicly. 5 USC 552(b)(4). This case addresses the scope of this exemption.

First, some background. Food Marketing Institute is a trade association representing retailers who operate tens of thousands of retail food stores. Argus Leader is a newspaper in Sioux Falls, South Dakota. As part of an investigation of food-stamp fraud, the newspaper filed a FOIA request with the USDA for data showing the amount of Supplemental Nutrition Assistance Program (SNAP)—formerly the Food Stamp Program—redemptions at individual stores.

While much SNAP data is publicly available, this store-level information is not. At the District Court, USDA presented evidence that the store-level data would provide a competitive advantage to other companies if released publicly. After a two-day trial, the District Court disagreed and ordered disclosure. The USDA gave notice to the retailers that it would not appeal, at which point Food Marketing Institute intervened to appeal on the USDA’s behalf.

The Eighth Circuit affirmed, relying on the D.C. Circuit’s test in Nat’l Parks & Conservation Ass’n v. Morton, 498 F.2d 765 (D.C. Cir. 1974), which eight circuits subsequently adopted. Under this test, the above exemption only applies if (1) the information at issue is kept private and not disclosed, and (2) “substantial competitive harm” would likely result if the information is publicly disclosed.

Food Marketing Institute argues that the National Parks test ignores the common meaning of the word “confidential,” thereby adding an “extratextual” requirement of showing competitive harm. Instead, it argues, the Court should apply its longstanding rules of statutory construction and give “confidential” its ordinary meaning, i.e., information “that is privately held and not disseminated,” without the need to show competitive harm if disclosed.

During oral argument, much of the Court’s questions for Food Marketing Institute’s lawyer, Evan Young, involved threshold justiciability issues that are outside this blog’s scope.

But, for our purposes, things got more interesting when Argus Leader’s lawyer, Robert Loeb, got his turn. One of Argus Leader’s primary arguments is that the Court should not look to the ordinary meaning of the term “confidential.”  Instead, because Congress used the language “trade secrets and commercial or financial information,” the Court should look to the then-existing common-law meaning of that term of art.

In its brief, Argus Leader argues that when the above exemption was enacted:

There was an established common-law term of art for non-public business information, disclosure of which would be tortious because it would cause competitive harm. Both courts and the relevant (and near-universally adopted) provisions in the first RESTATEMENT OF TORTS (1939) used the term “trade secrets and other confidential commercial information” (or some near-identical equivalent) to refer to this body of protected materials. Thus, in saying “trade secrets and other confidential commercial information,” courts and commentators meant non-public business information that would likely cause competitive harm if released.

Much of the Court’s questioning of Loeb focused on this argument. Justice Kagan, sounding like her more conservative colleagues, asked him to “give me your best textual argument” for why National Parks correctly interpreted the statute. Loeb responded by saying that the Court needs to look at the words Congress used in context, and that under common law, trade secrets included a competitive-harm requirement.

Justice Sotomayor responded by saying that the Court normally only applies common law to interpret statutory language when there is a term of art. Here, case law used different terms and phrases to cover trade secrets and confidential information. In response, Loeb argued that under the common law, there were two categories, trade secrets and confidential information. And both required a showing of competitive harm.

This didn’t seem to satisfy Justice Gorsuch, who noted that when a statute uses different words from the common law, it’s usually presumed that Congress intended a meaning other than the common law.

Justice Breyer focused on the concept of harm and how such a term would be defined. Noting that “you don’t have to write this opinion, but I might,” Justice Breyer pushed Loeb to clarify what words should be used in the opinion to describe the nature of harm that must be shown. Loeb again pointed to the common law.

Justice Alito asked whether, under common law, a showing of competitive harm was part of the claim itself or only a means for proving damages. Per Loeb, under common law, competitive harm is part of the essence of a trade secret.

Based on the Justices’ comments at oral argument, at least some of them have issues with the justiciability of this case, questioning whether Food Marketing Institute’s claims can be redressed or if they are moot. But if the Court reaches the merits of this case, I predict that it will strike the National Parks test, opting for the customary definition of “confidentiality,” without a showing of competitive harm.

Supreme Court to (Possibly) Address Trade Secrets

April 7, 2019 By in Case Summary, Defend Trade Secrets Act, Florida Non-Compete Lawyer, Trade secrets, Trade Secrets In the News Tags: , , , , 2 Comments

The U.S. Supreme Court rarely hears cases involving trade secrets, primarily because trade secrets have historically been governed by state law. Now that we have the Defend Trade Secrets Act (DTSA), it is more likely that the Court will have to address Circuit splits on statutory interpretation. But thus far, no such issues have reached the Supreme Court.

In a few weeks, however, the Court will hear oral argument in Food Marketing Institute v. Argus Lender Media, a Freedom of Information Act (FOIA) case that involves trade-secrets issues.

The FOIA contains an exemption for “trade secrets and commercial or financial information obtained from a person and privileged or confidential,” which does not need to be disclosed publicly. 5 USC 552(b)(4). This exemption has been interpreted to require proof that disclosure would cause substantial harm to the information source’s competitive position. Circuits have split on how to interpret this test.

The petitioner is asking the Court to dispense with this test and instead hold that the term “confidential” be interpreted under its ordinary meaning, i.e., information “that is privately held and not disseminated,” without the need to show competitive harm if disclosed. See Petitioner’s Brief at p. (i). Alternatively, the petitioner wants the Court to clarify that the substantial harm test is satisfied if “the party opposing disclosure establishes a reasonable possibility that disclosure might injure financial or competitive interests.” Id.

Since the statutory exemption includes trade secrets alongside confidential information, the Court may offer insight into how trade secrets are defined under the FOIA. In such a case, the Court’s comments could carry substantial weight in DTSA cases. Regardless, this case presents important issues for any company that seeks to protect its confidential information  and trade secrets when contracting with the government.

Video Blog: Start-Up Trade Secrets

August 31, 2018 By in Advice, Trade secrets, Trade Secrets Best Practices Tags: , , 1 Comment

TRANSCRIPT & LINKS:

Welcome to Protecting Trade Secrets. I’m Eric Ostroff. I’m a partner at Meland Russin & Budwick and I’m coming to you from my office in Miami Florida. I’m doing something new here on the Protecting Trade Secrets blog. Obviously, I’m on video right now, and I’ll be using video to create blog posts for at least some of the blog posts in the future. I’ll also go ahead and post a transcript of the video down below.

Today I want to talk about issues facing start-up companies who are looking to protect their proprietary information and trade secrets. I recently read an article on inc.com and I’ll go ahead and post a link to the article in the transcript below.

This article told the story of a company called HIDEit Mounts. They had a product that mounted video game consoles and camouflaged them so you didn’t have wires and things sticking out all over your living room.

When this company started out, it was a husband-and-wife team. They didn’t have any experience with product development, product design, or manufacturing, so they did with a lot of startup companies do; they partnered with a manufacturing company and worked with that company to design a prototype and then manufacture these products.

Things were going great. They were selling a lot of products; there were no direct competitors, and the company seemed like it was going to be successful. But then they hit a problem. Another company all of a sudden started selling very similar products, except they were actually a little bit better. And the HIDEit company thought that they might have to go out of business.

They did some research and were able to figure out that it was actually their manufacturer who was behind this competing company. Now thankfully for HIDEit, they went ahead and had their manufacturers sign a nondisclosure agreement early in the relationship. And they were able to use that contract to protect their IP rights and to protect their business. But a lot of startup companies just either ignore, try and use self-help, or don’t give enough thought to potential ways that having a lawyer or using legal solutions can protect against major problems down the road. A lot of companies will use forms off the internet or just won’t use lawyers at all.

The reality is that an extremely modest investment on the front end for a startup company in a competent lawyer who can can create agreements and give advice about ways that this company can protect its proprietary information can go a tremendous way to mitigate against and to deter really serious issues in the future.

So the lesson from this inc.com article for start-up companies is: Don’t think that you’re too early or you don’t have enough money to hire a lawyer. Speak with a lawyer early on in the process. Doing that can solve a lot of really terrible problems in the future.

That’s all for today. I appreciate your time.

 

Can Filing for Bankruptcy Invalidate a Noncompete?

August 9, 2018 By in Noncompete Tags: , , , , Leave a comment

Guest post by Solomon B. Genet.

Debtors and their lawyers sometimes use a bankruptcy filing as an offensive tool. In a recent case, a debtor tried to use his prior bankruptcy to shed his non-compete obligations. While this attempt was not successful, non-compete practitioners should be aware of this effort.

In In re Capps, a July 26, 2018 decision from the District of Kansas Bankruptcy Court, the individual debtor sold his company and signed an employment agreement with the buyer, agreeing to a series of non-compete, non-solicit and confidentiality obligations. The debtor later filed for bankruptcy, and the buyer fired him soon thereafter.  The buyer then discovered that the debtor was breaching his restrictive covenants and brought an action for declaratory relief in the bankruptcy court seeking a finding that the bankruptcy process and discharge did not relieve him of these obligations.

Bankruptcy Judge Nugent agreed with the plaintiff-buyer and rejected the debtor’s arguments, reasoning that: (1) the debtor’s breaches of the restrictive covenants occurred post-bankruptcy, and gave rise to “equitable” (i.e., injunctive) relief and not “a right to payment,” so the debtor did not discharge any debts arising from the agreements; and (2) the restrictive covenants were not “executory” contracts (material obligations on both sides), and therefore could not be rejected through the bankruptcy process.

The Capps debtor was unsuccessful in shedding his obligations.  But—hypothetically—a strategic legal counselor could use the Capps debtor’s arguments in a case with more favorable facts (and perhaps different applicable law) to assist a person subject to a non-compete to obtain relief long before his contracted time-period for his non-compete obligations expired.

A copy of the opinion can be downloaded here.

Federal Circuit Invalidates Financial Analysis Patent, Suggests Trade Secret Protection

May 24, 2018 By in Trade secrets Tags: , , Leave a comment

Since the Supreme Court decided Alice Corp. v. CLS Bank International in 2014, companies have had a difficult time patenting software and business methods. I am not a patent lawyer and this is not a patent blog. But a recent Federal Circuit case shows how companies with this type of IP may want to look to trade-secret laws for protection.

Last week, the Federal Circuit decided SAP America, Inc. v. InvestPic, LLC (a pdf of the opinion can be downloaded here). In this case, a judge in the Northern District of Texas granted judgment on the pleadings in favor of SAP, which filed a declaratory-judgment action seeking to invalidate InvestPic’s patent. The Federal Circuit affirmed.

InvestPic’s patent involved a technique that “utilizes resampled statistical methods for the analysis of financial data[.]” InvestPic claims this is superior to typical financial-market forecast methods that rely on the flawed assumption that “financial data follows a normal or Gaussian distribution.” (This reminds me of The Black Swan’s chapter on “The Bell Curve, That Great Intellectual Fraud.”)

Citing Alice, the Federal Circuit invalidated InvestPic’s patent, finding that it was directed to an abstract idea and did not contain an innovative concept.  This is not an uncommon post-Alice result. But at the end of its opinion, the Federal Circuit made a comment that caught my attention:

There is, in short, nothing “inventive” about any claim details, individually or in combination, that are not themselves in the realm of abstract ideas. . . . [P]atent law does not protect such claims, without more, no matter how groundbreaking the advance. An innovator who makes such an advance lacks patent protection for the advance itself. If any such protection is to be found, the innovator must look outside patent law in search of it, such as in the law of trade secrets, whose core requirement is that the idea be kept secret from the public.

Given the current state of patent law, many companies face a dilemma when trying to monetize potentially abstract ideas: make the disclosures necessary to seek a patent and risk having the patent rejected or invalidated, or adopt a business model that allows for trade-secret protection. This is a complicated analysis that involves many business and legal factors.

As the Federal Circuit noted, trade secrets cannot be publicly disclosed, and they must be reasonably protected. Business models can incorporate these restrictions. For example, it may be possible for a company to license its technology and include confidentiality obligations in the licensing agreement. Companies facing this choice need to involve trade-secret lawyers in strategy discussions and decisions.

Federal Court Addresses Defend Trade Secret Act Immunity

April 6, 2018 By in Defend Trade Secrets Act, Trade secrets, Trade Secrets in Discovery Tags: , , 1 Comment

The Defend Trade Secrets Act, 18 U.S.C. 1030, et seq., provides immunity from liability for misappropriation of trade secrets in certain circumstances, namely if the disclosure:

(A) is made–

(i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and

(ii) solely for the purpose of reporting or investigating a suspected violation of law; or

(B)  is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

Since the DTSA was enacted in May 2016, there have not been many cases analyzing this portion of the statute. The Eastern District of Pennsylvania examined it in a recent opinion, Christian v. Lannett Co., Inc., E.D. Pa. Case No. 16-963 (the opinion can be downloaded below).

Christian is an unusual trade-secret case, as it started when the plaintiff asserted claims for employment discrimination. During discovery, the defendant learned that the plaintiff had retained a company laptop, which led to the plaintiff producing 22,000 pages of documents. Per the defendant, these contained trade secrets.

The defendant then filed a counterclaim under the DTSA, as well as other related claims, based on the plaintiff’s disclosure of trade secrets. But there was apparently no evidence of disclosure to anyone except the plaintiff’s lawyer, who only received the documents to produce them in the litigation.

The court concluded that “Plaintiff’s alleged disclosure was made to Plaintiff’s counsel pursuant to a discovery Order of this Court, within the context of a lawsuit regarding violations of Title VII, the ADA, and the FMLA,” and applied the immunity provision above to bar the DTSA claim.

The court did not specifically cite the immunity provision. And a strict application of that provision would seem to exclude the plaintiff from its protection, since the disclosure was not “solely for the purpose of reporting or investigating a suspected violation of law.” But the court’s decision is well within the spirit of the DTSA, which should not be used to prevent parties in litigation from communicating freely with, and providing discoverable documents to, their counsel.

Christian v Lannett

 

AIPLA Trade Secrets Summit in San Diego, March 1-2

February 21, 2018 By in Trade secrets Tags: Leave a comment

The American Intellectual Property Law Association’s annual Trade Secrets Summit is next week in San Diego. This event, which I have attended for the past three years, is a great opportunity to learn from and network with trade secret practitioners, while racking up CLE credits.

I will be moderating a panel on Corporate Best Practices, and there are a number of great presentations scheduled. You can find out more information here.

Hope to see you there!