When businesses incorporate restrictive covenants, such as non-compete agreements, into their employment contracts, it’s crucial to understand the potential defenses that could arise if these covenants are challenged. One such defense is the “prior breach” defense, which can undermine an employer’s claim for breach of a restrictive covenant and any subsequent injunction action.
Understanding Prior Breach
A prior breach defense occurs when the defendant argues that the plaintiff, often the employer, breached the agreement first. This defense is commonly raised in situations where the employer has failed to fulfill its obligations, such as paying wages. If successfully proven, this defense can lead to the denial of the employer’s claim and the injunction they seek.
Elements of Prior Breach under Florida Law
Florida law outlines specific criteria that must be met for the prior breach defense to be valid. The following elements are essential:
- First Breach of Contract: The defendant must demonstrate that the employer breached the contract first.
- Material or Substantial Breach: The breach by the employer must be significant or substantial.
- Dependent Covenant: The breached covenant must be dependent, not independent.
- No Waiver by Non-Breaching Party: The non-breaching party (employee) must not have waived their right to enforce the contract.
Dependent vs. Independent Covenants
One of the critical elements in the prior breach defense is whether the breached covenant is dependent or independent.
- Dependent Covenants: These are covenants that go to the “whole consideration” or are essential to the main purpose of the contract. If the employer breaches a dependent covenant, it can undermine the enforceability of other provisions, including non-compete agreements.
- Independent Covenants: These covenants do not go to the whole consideration of the contract and are subordinate and incidental to its main purpose. Breaching an independent covenant does not typically provide grounds for invalidating the entire contract.
Ensuring Non-Compete Provisions Are Independent
To safeguard the enforceability of restrictive covenants, it is advisable to explicitly state in the employment contract that the restrictive provision is an independent covenant. Including clear language can help prevent the non-compete agreement from being invalidated due to a prior breach of another contractual provision.
Sample Contract Clause
To ensure clarity and legal standing, businesses should include a clause such as the following in their employment agreements:
“The covenants set forth herein shall be construed as agreements independent of any other provision in any other agreement by, between, among, or affecting the parties, and the existence of any claim or cause of action of Employee against Employer, whether predicated on this agreement or otherwise, shall not constitute a defense to the enforcement of this agreement .”
Importance of Proper Contract Preparation
Proper contract preparation is essential for providing clients with a significant advantage when it comes time to enforce a restrictive covenant. By clearly defining the nature of covenants within the contract, businesses can mitigate the risk of the prior breach defense being successfully raised against them.
Do you have questions about your employment agreements? Reach out to us for a consultation.
Information provided for educational purposes, not legal advice*
