Employers Must Carefully Draft Attorneys' Fees Provisions In Non-Compete Agreements

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[author: SCOTT T. SILVERMAN]

In Rogers v. Vulcan Manufacturing Co., Inc., No. 11-3927 (Fla. 1st DCA June 1, 2012), the First District Court of Appeal explained that employers must carefully draft non-compete agreements to avoid owing attorneys' fees to former employees who do not pay for their own defense, but, rather, have it funded by a subsequent employer.  In the case, a former employee prevailed in a non-compete case when the former employer's suit was involuntarily dismissed for lack of prosecution. The contract provided for attorneys' fees to the prevailing party: "In any action to enforce any term, condition, or provision of this agreement, the prevailing party shall be entitled to recover the reasonable attorney's fee incurred to enforce same."  The trial court awarded $0 in fees, reasoning that the defendant did not personally "incur" any fees, because they were paid by the subsequent employer.  On appeal, the First DCA disagreed, opining that the clear intent of the agreement was for the loser to pay attorney's fees incurred in the case, regardless of the source of the funds.  The court stated that “If the parties had intended to limit entitlement to situations in which the prevailing party was the one who actually paid attorney’s fees and was seeking reimbursement, or incurred an obligation to pay such fees, the Agreement could have so provided. But it did not, and the trial court erroneously read such a limitation into the Agreement.”  This case illustrates the need for employers to consider revising their non-compete agreements to make sure that they are not obligated to pay fees in a losing effort to enforce a non-compete, where the defense is funded by a subsequent employer.  Although not an issue in the case, employers should also be aware that an agreement to fund defense of a non-compete may be grounds for a tortious interference claim against the subsequent employer.

 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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