Strict new non-compete law in Florida empowers employers

Florida has enacted a new non-compete law that gives employers broad power.

The Contracts Honoring Opportunity, Investment, Confidentiality and Economic Growth, or CHOICE Act, passed earlier this month, according to media reports. The bill, lobbied by hedge fund billionaire Citadel CEO Ken Griffin, allows employers to extend non-compete agreements up to four years, among other actions.

Gov. Ron DeSantis did not sign the bill, but let it go into effect passively by way of Florida law. Effective July 1, the CHOICE Act also covers garden leave agreements, in which a company pays an employee to not work, and only permits certain future employment opportunities.

The law applies to high earners, with "covered" workers defined as those who earn a salary larger than twice the annual median wage of the Florida county where the firm is based, or where the employee lives.

The majority of states have some form of non-compete bans in effect, while 10 states have no restrictions, according to the Economic Innovation Group, a public policy organization. 

What is the impact on mortgage lenders?

Orlando Diaz, president of Miami-based Metro Fund and president of the Florida Association of Mortgage Professionals, said his organization discussed the bill with its lobbyist. 

"We're not seeing a connection of how that's going to affect us with the way contracts are done with mortgage brokers," said Diaz. 

That assessment is similar to mortgage attorneys who said a Federal Trade Commission ban on non-competes announced last spring wouldn't affect mortgage roles. That FTC ban faced a legal setback last August, and the regulator's appeal of the Texas federal court's decision remains pending, according to case filings. 

More common at mortgage shops are non-solicitation and non-disclosure agreements, the subject of many poaching complaints between lenders. Companies have accused each other in prolonged litigation of stealing loans in progress, although many of those lawsuits are often settled ahead of jury trials.

Diaz said pipeline ownership is the main issue mortgage professionals would have around employer agreements. He said non-competes, particularly any under Florida's four-year allowance, would be difficult. 

"Telling somebody, 'Hey, you can't originate loans for another three or four years,' I think that's kind of draconian," he said.