The Florida Legislature passed the “Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act” last month to provide employers two new outlets for protecting confidential information and client relationships from departing employees. Notably, the CHOICE Act does not change or limit Florida’s existing restrictive covenant law but rather expands it to provide a covered garden leave agreement and a covered noncompete agreement. If signed by Gov. Ron DeSantis, the law will go into effect on July 1, 2025.
Key Highlights
- The act creates a presumption that garden leave agreements and noncompete agreements adhering to its “covered” guidelines are enforceable and do not violate public policy.
- The act requires courts to issue a preliminary injunction against employees who seek to violate a “covered” agreement.
- To have the injunction dissolved or modified, the “covered” employee must establish either:
- The employee will not perform similar work during the covered period or use the confidential information or customer relationships of the covered employer.
- The employee will not engage in the same business or activity as the covered employer within the restricted area.
- The employer has failed to pay the covered employee the compensation contemplated under the covered agreement and has had a reasonable amount of time to cure the deficiency.
Who Is Covered?
A “covered employee” is defined as an employee or individual who earns or is reasonably expected to earn a salary greater than twice the annual mean wage of either: (1) the county in which the employer has its principal place of business or (2) if the employer’s principal place of business is not in Florida, the county in which the individual resides. However, the law will not apply to healthcare practitioners licensed under Florida law.
A “covered employer” is defined as an entity or individual who employs or engages a covered employee.
What Are the Requirements?
Covered Garden Leave Agreement
A garden leave agreement allows an employer to prevent a departing employee from engaging in other employment provided the employee is still being paid. The period between the employee’s resignation and dissolution from the employer’s payroll is known as the “notice period.” Under the CHOICE Act, a garden leave agreement is enforceable if:
- The employee was provided the agreement seven days before the agreement or offer of employment expired and was advised in writing of their right to seek counsel.
- The employee acknowledges in writing they will receive confidential information or customer relationships during their employment.
- The agreement provides:
- The employee cannot be required to provide services to their employer after the first 90 days of the notice period.
- The employee may engage in nonwork activities at any time, including during normal business hours, during the remainder of the notice period.
- The employee may work for another employer while still employed by the covered employer with the covered employer’s permission.
- The employer will pay the employee their regular base salary plus benefits for the duration of the notice period.
- The notice period will not extend beyond four years. However, an employer may choose to shorten the notice period at its discretion by providing the employee with 30 days advance written notice.
Covered Noncompete Agreements
Noncompete agreements prohibit an employee from providing services similar to the services provided to their employer for a period of time within a specific geographic region after the end of their employment. Under the CHOICE Act, a noncompete agreement is enforceable if:
- The employee was provided the agreement seven days before the agreement or offer of employment expired and was advised in writing of their right to seek counsel.
- The employee acknowledges in writing they will receive confidential information or customer relationships during their employment.
- The noncompete period does not exceed four years.
- The noncompete period is reduced for the duration of any non-working portion of the notice period of any applicable garden leave agreement between the covered employee and covered employer.
What Should Employers Do?
- Review existing agreements for compliance with the act and consider revisions.
- Remember these agreements may be introduced during the course of employment provided the employee still has seven days to consider signing the agreement before the offer expires.