Employment-Eleventh Circuit Upholds Non-Competition And Non-Solicitation Covenant

These days, it seems that it is becoming increasingly difficult to create an enforceable non-competition or non-solicitation covenant. But that is what the plaintiff did in H & R Block Eastern Enterprises, Inc. v. Morris, No. 09-11184 (11th Circuit 2010). In this case, defendant Vicki D. Morris (“Morris”), a tax professional, had entered into an employment agreement (the “Agreement”) with her employer, plaintiff H&R Block Eastern Enterprises, Inc. (“Block”). The Agreement included a non-competition covenant and a non-solicitation covenant. After Block terminated her, Morris started Dreams Tax Service, Inc. and personally prepared tax returns for 47 former Block clients. Block filed suit against Morris, claiming she violated the terms of the Agreement by soliciting Block’s clients, providing tax-preparation services to Block’s former clients, and soliciting and hiring Block’s employees.

The non-competition covenant stated that : (1) for a period of two years following the expiration of the Agreement (or the resignation or termination of Morris), Morris could not, directly or indirectly, provide any tax (or tax-related) services to any of Block’s clients with whom Morris had contact while working at Block, and (2) this restriction is limited to Morris’s district of employment, and a 25 mile radius from the office at which Morris worked. The non-solicitation covenant stated that, for the same 2-year period, Morris could not, directly or indirectly, solicit any of Block’s clients, with whom she had contact while working at Block, for the purpose of providing tax (or tax-related) services.

The Court applied Georgia law to the question of whether the non-competition and non-solicitation covenants were enforceable. As to the non-competition covenant, the Court applied the three-element test of duration, territorial coverage, and scope of the covenant. The Court ruled that the non-competition covenant is enforceable, because it is reasonable, considering the nature and extent of the business, the situation of the parties, and other relevant circumstances. Similarly, the Court ruled that the non-solicitation covenant is enforceable, because it is reasonable with respect to duration and activity covered, and it does not prohibit Morris from accepting unsolicited business.