On November 3, 2021, a Florida Court of Appeals reversed a trial court decision that a supplier of propane products and related services was not entitled to a temporary injunction to prevent a former employee from violating the terms of the restrictive covenant in his employment contract. The case on appeal, AmeriGas Propane, Inc. v. Sanchez, 2021 WL 5099119 (Fla. 3d DCA 2021), provides employers with an inside look into a remedy available when an employee violates a restrictive covenant and the burden of proof necessary to obtain said remedy. The case also serves as a lesson for employees who do not conform to the terms of their restrictive covenants.
Case Background
In February 2012, Nelson Sanchez was hired by AmeriGas Propane, Inc. (AmeriGas) as an account manager and sales representative. AmeriGas provides propane products and related services to residential and commercial customers, including grocery stores and restaurants, in the Miami, Florida area. As part of his job duties, Sanchez was tasked with maintaining client accounts and acquiring new customers, a role that granted him access to AmeriGas’s proprietary information, including pricing data, customer lists, policies, and procedures.
Within two months of being hired, Sanchez entered into a confidentiality and post-employment agreement with AmeriGas, which included nondisclosure, non-competition, and non-solicitation restrictive covenants. The agreement’s confidentiality provision required that Sanchez agree to protect AmeriGas’s confidential information from disclosure and refrain from divulging any of AmeriGas’s confidential information during or after the term of his employment for the use of any entity not associated with AmeriGas.
The agreement further provided that, for a period of two years after Sanchez’s termination of employment with AmeriGas, he was
- Prohibited from directly or indirectly soliciting the business of any AmeriGas customer within a fifty-mile radius of any AmeriGas District Office where he worked during the two years prior to his termination; and
- Prohibited him from directly or indirectly selling or providing propane or other good or services provided by AmeriGas to any AmeriGas Customer located within fifty-mile radius of any AmeriGas District Office where he worked in the two years prior to his termination.
On August 14, 2019, Sanchez resigned from AmeriGas and began employment with Blossman Gas (Blossman). Blossman, a company also engaged in the propane industry in the Miami area, was a direct competitor of AmeriGas. Following Sanchez’s departure, eighteen customers Sanchez previously managed transitioned from AmeriGas to Blossman.
In December 2019, AmeriGas filed suit against Sanchez and Blossman, asserting Sanchez breached the terms of his contract by violating the restrictive covenants and claiming both Blossman and Sanchez tortiously interfered with AmeriGas’s business (1) directly or indirectly soliciting customers within a fifty-mile radius; (2) directly or indirectly selling or providing propane products and services to its customers within fifty miles; (3) disclosing confidential information, and (4) otherwise violating the terms of his employment agreement.
Legal Standard
A temporary injunction is a remedy available to a party when it wants to stop an adverse party from engaging in unwanted behavior. Under Florida Statute § 542.335 , a temporary injunction may be used to enforce the terms of a non-compete or non-solicitation only if the movant can establish:
- The existence of a legitimate business interest; and
- The temporary injunction is reasonably necessary to enforce the legitimate business interest.
Under the statute, “legitimate business interests” include, but are not limited to, substantial relationships with prospective or existing customers; customer goodwill associated with certain intellectual property or geographic or marketing area; extraordinary or specialized training; valuable confidential information; or trade secrets.
Once the movant establishes a legitimate business interest and the necessity of a temporary injunction to enforce this interest, he or she must further demonstrate (1) a substantial likelihood of success on the merits of their claim for a temporary injunction; (2) a lack of adequate remedy at law; (3) the likelihood of irreparable harm absent the entry of an injunction; and (4) that injunctive relief will serve the public interest. The movant has the burden of proof and must provide substantial evidence to support each element of this standard.
Court’s Ruling
In reversing the trial court’s decision, the Third District Court of Appeals (3rd DCA) , which handles appeals from trial courts in Miami, determined AmeriGas had a legitimate business interest justifying the necessity of a temporary injunction to enforce Sanchez’s restrictive covenants.
In support of its ruling, the 3rd DCA pointed to evidence in the court record establishing Sanchez called AmeriGas customers directly and asked if they were having issues with their service, provided translation services for a customer that eventually left AmeriGas to enroll in Blossman, and supplied propane and related services to customers he previously managed when working at AmeriGas. This evidence led the 3rd DCA to determine AmeriGas had a substantial likelihood of establishing Sanchez violated the terms of the non-compete and non-solicitation provisions of his employment contract.
The 3rd DCA also highlighted that because the losses at issue were primarily customer relationships and dissemination of confidential information, money damages were insufficient to cure AmeriGas’s injury—rather, an injunction was the adequate remedy to prevent further injury. In examining the third factor to demonstrate the necessity of an injunction, the 3rd DCA pointed out that Florida Statute §542.335(1)(j) mandates a presumption of irreparable harm once a restrictive covenant is violated—the burden then shifts to the non-moving party to rebut this presumption. Sanchez’s arguments that his role in Blossman was limited to a sales representative, enrolling customers, and maintaining relationships was insufficient to rebut the presumption.
Finally, in finding AmeriGas met the fourth factor, the 3rd DCA reiterated that restrictive covenants are in essence contractual rights and there is a cognizable public interest in protecting and enforcing these contractual rights.
Takeaways
This case provides important lessons for both employers and employees who find themselves faced with a potential breach of a restrictive covenant.
For employers: If you believe the terms of a restrictive covenant has been breached, it is important you understand which remedies are available to you and which are most applicable to your specific situation. The AmeriGas case provides an example of an important remedy available to employers (i.e., temporary injunction) and establishes what factors employers must demonstrate to succeed on a request for a temporary injunction.
This case also provides a prime example of the type of situation where an injunction is helpful—because AmeriGas’s losses were goodwill and proprietary, rather than only monetary, the court determined an injunction was the appropriate remedy. In situations where lost profits are the primary damage, a court may determine an injunction is not readily available to an employer. An experienced non-compete/non-solicit attorney can assist you in analyzing your likelihood of success at being granted a temporary injunction, as well as alternative remedies available to you.
For employees: It is crucial you understand not only the terms of your restrictive covenants, but also potential adverse effects should you fail to abide by them. The court’s enforcement of a temporary injunction in AmeriGas, for example, may severely limit Sanchez’s role in Blossman and could have an adverse effect on his employment there. Should you have questions about the limitations proposed in a restrictive covenant, it is judicious to consult with an employment attorney prior to taking action that may constitute a breach.