Florida's CHOICE Act Transforms Noncompete and Garden Leave Agreements

Florida’s Contracts Honoring Opportunity Investment Confidentiality and Economic Growth (CHOICE) Act took effect July 1. It brings the most sweeping changes to Florida’s restrictive covenant framework in years.

This legislation heralds a transformative shift in Florida's noncompete law, introducing significant modifications to how noncompete and garden leave agreements are enforced. Lawmakers said the act aims to bolster economic growth and protect business interests within the state.

Traditionally, Florida has relied on statutory frameworks to enforce noncompetes, particularly under Florida Statute § 542.335. The statutes require courts to evaluate noncompete agreements based on legitimate business interests and the reasonableness of restrictions concerning time, geography and business scope. The CHOICE Act enhances this framework by facilitating the immediate enforcement of certain noncompete and garden leave agreements if certain conditions are met.

Who Does the CHOICE Act Cover?

The CHOICE Act applies to covered employees or independent contractors earning more than twice the annual mean wage in the Florida county either where the covered employer’s principal place of business is located or, if the covered employer’s business is located outside of Florida, where the covered individual resides.

Depending on the Florida county, the compensation threshold could range from $80,000 to nearly $150,000. Notably, the act expressly excludes licensed health care practitioners as defined in Section 456.001, Florida Statutes, from its scope. 

Changes for Noncompete Agreements:

1. Extended duration: Noncompete agreements can now extend up to four years post-employment, a notable increase from the previously common two-year period.
2. Scope of restriction: These agreements can restrict employees from engaging in similar roles where they might leverage confidential information or customer relationships from their former employer.
3. Geographic restrictions: The act eliminates the need to assess the reasonableness of geographic restrictions, simplifying the enforcement process.
4. Legal counsel notification: For a noncompete agreement to be enforceable, the employer must notify the employee of their right to legal counsel at least seven days before signing. The agreement must also acknowledge receipt of confidential information.

Changes for Garden Leave Agreements:

1. Notice period: The CHOICE Act introduces structured garden leave agreements. These require both parties to agree in advance on a notice period of up to four years before terminating employment.
2. Salary and benefits: During this period, the employer must continue paying the employee's salary and benefits.
3. Service obligation: The employee is not obligated to provide services after the first 90 days.
4. Non-work activities: The employee may engage in non-work activities or work for another employer, with permission, and the employer can reduce the notice period with at least 30 days' written notice.
5. Legal counsel notification: These agreements also require the employer to provide written notice of the right to seek legal counsel and the employee's acknowledgment of receiving confidential information.

Employers in Florida looking to expand coverage of noncompete agreements for covered employees should consult legal counsel to integrate the CHOICE Act’s provisions into operational frameworks, including the following actions:

• Review and revise existing agreements: Ensure that current noncompete and garden leave agreements comply with the act’s requirements.
• Update hiring practices: Incorporate the mandatory notice periods and ensure prospective employees know their rights under the new law.
• Reinforce confidentiality protocols: Implement measures to safeguard proprietary information and trade secrets.

While the CHOICE Act introduces significant changes, it does not entirely replace Florida's existing statutory framework for restrictive covenants under Florida Statute § 542.335. This framework continues to govern agreements not covered by the CHOICE Act.

For covered employees and independent contractors, however, the CHOICE Act provides a unique opportunity for businesses to expand the scope and duration of noncompete and garden leave agreements and bolster their enforceability. By leveraging the act's provisions, employers can now more effectively protect their business interests against unfair competition.

Please contact Raquel Ramirez Jefferson or any member of the Phelps labor and employment team if you have questions or need advice or guidance.