Breach of Contract Lawsuits May be Brewing over Amazon Non-Compete – Part 2

In Part I of this Orlando breach of contract lawyer blog post, called Breach of Contract Lawsuits May be Brewing over Amazon Non-Compete- Part I, we began analyzing the enforceability of Amazon’s non-compete contract under Florida law.   Specifically, we discussed whether or not Amazon’s non-compete would be enforceable in an Orlando, FL breach of contract lawsuit against a warehouse worker under Florida Statutes § 542.335.  This statute controls the enforceability of restrictive covenants in the state, and provides that a non-compete or non-solicitation contract is only enforceable if it protects the employer’s “legitimate business interests.”  As defined in section 542.335:

The term “legitimate business interest” includes, but is not limited to:

1. Trade secrets, as defined in s. 688.002(4).

2. Valuable confidential business or professional information that otherwise does not qualify as trade secrets.

3. Substantial relationships with specific prospective or existing customers, patients, or clients.

4. Customer, patient, or client goodwill associated with:

a. An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress”;

b. A specific geographic location; or

c. A specific marketing or trade area.

5. Extraordinary or specialized training.

Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.

So Amazon cannot just sue an Orlando worker for breach of contract if one of its former workers breached the employment contract containing the non-compete covenant.  It can only prevail in a suit to enforce its contract if the contract is supported by a legitimate business interest.  In any Florida breach of contract action to enforce Amazon’s non-compete, it would have to present evidence that its non-compete is justified based on one of the five listed legitimate business interests (or some other reason not listed), which are discussed in turn below:

Trade secrets, as defined in s. 688.002(4)

It’s unlikely that Amazon warehouse workers learn any trade secrets, as that term is defined in the Florida Statutes.  Under Florida contract law, a trade secret means:

“Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process that:

(a)  Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b)  Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

So in lay terms, a trade secret is some form of information that:

1. is a secret, and

2. is kept secret from the public

Amazon is not going to disclose trade secrets to its rank and file warehouse employees.  There is simply no need to do so.  Providing trade secret information to rank and file employees would breach the duty to keep the trade secret a secret, which would potentially endanger the trade secret itself as not qualifying as trade secret.

Valuable confidential business or professional information that otherwise does not qualify as trade secrets.

This is likely one of the better arguments for Amazon.  An inventory and warehouse system by itself would generally not qualify as a trade secret or even as confidential.  However, pieces of information that do not constitute confidential, protected information individually can become protected information when put together in a unique way or using a confidential, proprietary process or technique to combine and utilize otherwise non-protected information.  So Amazon could argue that its integrated warehouse/shipping management system is built on years of trial and error experience, large investments of cash, and many hundreds of hours of applied expertise, all used to develop a system that is the envy of its peers.

Substantial relationships with specific prospective or existing customers, patients, or clients.

Amazon warehouse workers do not seem to have any relationships with customers. There may be telephone calls or emails exchanged, but this type of communication would not constitute a “substantial relationship.”  Warehouse workers are pretty much stuck working in the warehouse by themselves.  That’s why warehouse workers always look excited if you walk in, they get to meet someone!

Customer, patient, or client goodwill associated with:

a. An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress”;

b. A specific geographic location; or

c. A specific marketing or trade area.

This subsection does not apply to our situation.  It is typically used by franchisors against franchisees to protect against unauthorized use of and association with the franchisor’s brand.  For example, if an Orlando, Florida Waffle House breached its franchise contract and the franchisor terminated the contract, the Waffle House could sue its former franchisee to enforce the non-compete covenant to protect its customer and client goodwill associated with using the “Waffle House” brand.

Extraordinary or specialized training.

This could be a point of contention as well because Amazon could argue that it operates a very sophisticated retail business that uses cutting edge technology together with Amazon’s knowledge, expertise and knowledge of processes involved due to its time and experience in the industry.  In short, Amazon would have to show that it trained its employees in a specialized and “extraordinary” manner for which it is entitled to protection from interlopers.

This would be a close call.  To determine the answer would depend on the actual training that the warehouse employees receive.  If they are simply trained to locate objects and move them around the warehouse for shipping it is unlikely that a court would find for Amazon.  All retailing businesses have to have “gofers” that take care of the packing and shipping of products.  These types of workers are likely not subject to an enforceable non-compete covenant.  The training has to be “above and beyond” what normal warehouse workers receive.

In conclusion, whether or not the Amazon non-compete contract is enforceable would really depend on the specific facts of the situation.  To enforce the employment contract, Amazon has to prove it supports Amazon’s “legitimate business interests.”  There are probably only two areas that might satisfy the “legitimate business interest” required by Section 542.335:  Confidential information that does not qualify as a trade secret and extraordinary or specialized training.  Amazon’s best argument seems to be that it has developed a proven “system” of warehouse management, shipping management and oversight of all aspects of the business that is subject to protection as confidential information that does not qualify as a trade secret.  It could also argue that its specialized training constitutes a “legitimate business interest” that should be protected by a non-compete contract.

The reality of the situation is that workers earning around $12 per hour are unlikely to hire an attorney to represent them if any breach of contract lawsuit should arise.  If they do, former Amazon employees should know that under section 542.335, the prevailing party may recover the attorney’s fees and costs incurred in enforcing or defending litigation over breach of non-compete contracts in Orlando, FL and elsewhere.  You can read more about the issues raised by Amazon’s noncompete contract here.

 

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