It has long been established that non-compete agreements are enforceable only when justified by a “legitimate business interest.” A recent decision of the Florida Supreme Court held that home health care referral sources can be a protected legitimate business interest for purposes of this requirement of Florida law.
The Court’s decision was issued in a consolidated appeal which involved two separate cases where individuals worked as marketing representatives for home health agencies. As recognized by the Supreme Court in this case, home health care companies rely heavily upon referrals from health care providers and “[t]he importance of referrals to [home health care companies] cannot be overstated.” As a result, both individuals had executed non-compete agreements with their employers. Despite their non-compete agreements, both individuals subsequently left their employment to work for competing home health care companies within the area covered by their respective non-compete agreements. Both individuals also continued to solicit referrals from providers who had previously provided referrals to their former employers. Both former employers brought suit to enforce the terms of their non-compete agreements.
For purposes of the suits, it was undisputed that both individuals had “engaged in conduct in violation of their non-compete employment contracts by working for direct competitors of their prior employers within the non-compete territories during the relevant periods.” Thus, the only matter at issue in the appeal was whether home health service referral sources are a protected legitimate business interest under the Florida statute relating to non-compete agreements.
After noting that “for [home health care companies], there is an indispensable relationship between referral sources and their undisputed legitimate business interests in relationships with patients” the Court concluded that “home health service referral sources may be a protected legitimate business interest within the meaning of section 542.335, depending upon the context and proof adduced.”
While the Court did not identify the specific circumstances or forms of proof upon which it would rely in determining that specific home health service referral sources were in fact protected legitimate business interests, existing case law has established that courts will closely consider the employer’s investment in establishing the referral sources, the importance of the referral sources to the employer, and whether there are special facts present, over and above ordinary competition, which, absent a non-compete agreement, would allow the former employee to gain an unfair advantage in competition with the former employer.
Thus, although the exact circumstances which support the protection of home health care referral sources must still be established on a case-by-case basis, this decision does definitively settle that home health care referral sources are not wholly excluded from protection and that non-compete agreements protecting these sources may be enforceable under appropriate factual scenarios.
Case Information: White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC., No. SC16-28, SC16-400, 2017 WL 4053930 (Fla. Sep 14, 2017).
Prepared by: Denay Brown, Esq.