Hapney v. Central Garage, Inc.

Citation579 So.2d 127
Decision Date01 February 1991
Docket NumberNo. 90-00475,90-00475
PartiesP. David HAPNEY, Appellant, v. CENTRAL GARAGE, INC., a Florida Corporation, d/b/a Gulfcoast Auto and Automotive Accessories and Ara Tampa, Appellee. 579 So.2d 127, 59 U.S.L.W. 2587, 1991-1 Trade Cases P 69,322, 6 Indiv.Empl.Rts.Cas. (BNA) 1110, 6 Indiv.Empl.Rts.Cas. (BNA) 353, 16 Fla. L. Week. D1344, 16 Fla. L. Week. 359
CourtCourt of Appeal of Florida (US)

Thomas T. Steele of Fowler, White, Gillen, Boggs, Villareal & Banker, P.A., Tampa, for appellant.

Philip A. McLeod, St. Petersburg, for appellee.

PATTERSON, Judge.

This case presents the following question: whether judicial review of an employee's covenant not to compete is limited to determining the covenant's reasonableness in time and area without regard to whether the covenant reasonably relates to protecting a legitimate business interest of the employer? We answer in the negative and reverse.

FACTS

Appellee Gulfcoast is a Florida corporation engaged in the installation, repair and maintenance of auto air conditioners and related auto accessories. It has facilities in Tampa, St. Petersburg, Sarasota, and Ft. Myers, and draws customers from other surrounding areas.

Appellant Hapney is a Hillsborough County resident who, from 1981 to 1988, worked in various auto repair shops in the Tampa area where he learned to install and repair auto and truck air-conditioning systems. In 1988 he went to work for Gulfcoast.

As a condition of Hapney's employment, he entered into an "Employee Confidentiality Agreement and Covenant Not To Compete" which in pertinent part provides:

I further agree that for a period of three years following the termination of my employment I will not offer, as an agent, employee, owner, or distributor, similar products or services on behalf of a competitor of the Company on the west coast of Florida from Crystal River to Naples or inland 100 miles.

On July 14, 1989, Hapney voluntarily terminated his employment and began working for a direct competitor of Gulfcoast.

On August 1, 1989, Gulfcoast instituted an action to enforce the covenant not to compete against Hapney and his new employer.

After an evidentiary proceeding, the trial court entered a temporary injunction in favor of Gulfcoast. That order is the subject of this interlocutory appeal

The issue with which we are concerned centers around the following findings of fact made by the trial judge:

[W]hile employed by Gulfcoast, (i) he [Hapney] received no significant training in the installation and repair of automobile air conditioning systems, beyond the knowledge and skill that he possessed when he began work with Gulfcoast, (ii) he received significant training in the installation of cruise controls and cellular telephones in automobiles, (iii) he had no significant contacts with Gulfcoast's customers and developed no significant relationships with Gulfcoast's customers, and (iv) he acquired no trade secrets or confidential business information of Gulfcoast.

HISTORICAL PERSPECTIVE

Under the common law of England, a contract restricting a person's right to pursue his trade or occupation was deemed void as against public policy. Medieval concepts that a person could not pursue a trade in which he had not been apprenticed made the rule necessary, because prohibiting a person from working under the supervision of one other than his original employer would leave the person in involuntary servitude or unable to provide for himself and his dependents. See Standard Newspapers, Inc. v. Woods, 110 So.2d 397 (Fla.1959).

With the passage of time, the ancient rules of apprenticeship were abandoned, and it became recognized that in special circumstances limited restraints of competition were both necessary and proper to protect an employer's proprietary rights. Herbert Morris, Ltd. v. Saxelby, [1916] 1 A.C. 688; Bowler v. Lovegrove, [1921] 1 Ch. 642. Thus evolved the distinction between contracts prohibiting competition per se, which were prima facia invalid, Northwest Side Lumber Co. v. Layton, 239 Ill.App. 82 (App.Ct.1925), and contracts protecting an employer from unfair competition from a former employee who had obtained trade secrets, or other confidential information, or special relationships with customers during the course of his employment. May v. Young, 125 Conn. 1, 2 A.2d 385 (1938); Super Maid Cook-Ware Corp. v. Hamil, 50 F.2d 830, 831 (5th Cir.), cert. denied, 284 U.S. 677, 52 S.Ct. 138, 76 L.Ed. 572 (1931) ("It is a settled principle of law that no man may, per se, contract with another that the other will not follow a calling by which he may make his livelihood."). These basic concepts are embraced in the law of our state. See Arnold v. Grossman, 75 So.2d 593 (Fla.1954); Love v. Miami Laundry Co., 118 Fla. 137, 160 So. 32 (1934).

In 1953 the legislature enacted section 542.12, Florida Statutes (1953) (renumbered in 1980 as section 542.33), which acknowledged the common law principle that contracts in restraint of trade are void. The statute provides an exception which includes, in general terms, that an employee "may agree with his employer, to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer." 1

The statute is silent on the issue of whether for such contracts to be valid they must relate to the protection of a proprietary interest of the employer. Thus, we must determine if such requirement is to be implied in the statute or whether the legislature has intended to authorize contracts

which prohibit competition per se. No Florida decision addresses this precise question
OTHER JURISDICTIONS

Our review of the laws and decisions of our sister states which permit employee noncompetition agreements reveals an overwhelming majority requiring, at a minimum, that such contracts be reasonably related to the protection of a "legitimate business interest" or "protectible interest" of the employer. The rule, generally stated, is that an employer may not enforce a post-employment restriction on a former employee simply to eliminate competition per se; the employer must establish its legitimate business interest to be protected. See Bryceland v. Northey, 160 Ariz. 213, 772 P.2d 36 (Ct.App.1989). 2

The Supreme Court of Tennessee expressed the rule as follows:

[A]ny competition by a former employee may well injure the business of the employer. An employer, however, cannot by contract restrain ordinary competition. In order for an employer to be entitled to protection, there must be special facts present over and above ordinary competition. These special facts must be such that without the covenant not to compete the employee would gain an unfair advantage in future competition with the employer.

Hasty v. Rent-A-Driver, Inc., 671 S.W.2d 471, 473 (Tenn.1984) (citations omitted).

The rule is an expression of common sense which both protects the employer from unfair competition and recognizes the right of an individual, in a free and competitive society, to earn an honest living and better his status along the way. In a broader sense, all consumers benefit from the availability of goods and services, the quality and price of which are determined by fair competition, unfettered by artificial monopolistic practices.

FLORIDA LAW

We have no reason to doubt, and so determine, that the general rule stated above is an integral part of our law, which

is implied in section 542.33(2)(a), Florida Statutes (1989)

As we have noted, no Florida court has addressed the precise issue presented here. Several decisions, however, imply recognition of the rule. In Capelouto v. Orkin Exterminating Co., 183 So.2d 532, 534 (Fla.), appeal dismissed, 385 U.S. 11, 87 S.Ct. 78, 17 L.Ed.2d 10 (1966), our supreme court addressed the constitutionality of section 542.12 (the predecessor of 542.33), and in upholding the statute, observed:

[T]he fact that such contracts may be lawfully made and enforced under the statute does not ipso facto make every such contract enforceible [sic] as written. The restrictive provisions of such contracts will generally be enforced in such way as to protect the legitimate interests of the employer....

The same court held in Akey v. Murphy, 238 So.2d 94, 96-97 (Fla.1970), "that there was a 'reasonable interest' to be protected by the restraining covenant." Later in Miller Mechanical, Inc. v. Ruth, 300 So.2d 11, 12 (Fla.1974), the supreme court explained that section 542.12 "is designed to allow employers to prevent their employees and agents from learning their trade secrets, befriending their customers and then moving into competition with them."

The recent decisions of this court are of like tenor. In Flatley v. Forbes, 483 So.2d 483, 485 (Fla. 2d DCA 1986), Judge Frank, who joins in this opinion, observed in affirming the ruling of the trial court that the covenant in question was void and unenforceable, saying:

Flatley, however, had no tangible benefits stemming from the contract affecting only the Pasco County practice to protect by barring Forbes from practicing in Pinellas County.... The obvious and sole purpose of the covenant was to exclude Forbes from competing with Flatley in Pinellas County.

And in Marshall v. Gore, 506 So.2d 91, 92 (Fla. 2d DCA 1987), we limited the scope of an injunction to protect only the "legitimate business interests" of the employer.

Perhaps most fundamental to our determination is that "[t]he right to work, earn a living and acquire and possess property from the fruits of one's labor is an inalienable right." Lee v. Delmar, 66 So.2d 252, 255 (Fla.1953); Art. I, Sec. 2, Fla. Const. Implicit in this right is the opportunity to move freely within the labor force in the quest for advancement in position and economic productivity. Certainly the common law of this state recognized and jealously guarded this freedom in condemning and restricting...

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