The Florida Supreme Court has spoken:
Home health service referrals may be a protected legitimate business interests
and subject to protection under Florida’s noncompete statute, Section
542.335, Florida Statutes.
We previously wrote about this issue in our February 22, 2016 blog. At
that time, the Florida Fifth District Court of Appeal held that referral
sources do not qualify as a legitimate business interest under Fla. Stat.
§ 542.335 for the purposes of enforcing a non-compete. We pointed
out that the Fifth District’s decision directly conflicted with
the Fourth District Court of Appeal decision in Infinity Home Care, LLC
v. Amedisys Holdings, LLC. The uncertainty created in the state by the
conflicting decisions of two Florida appellate courts ultimately led to
the Florida Supreme Court resolving the conflict in Elizabeth White v.
Mederi Caretenders Visiting Services Of Southeast Florida, LLC et. al,
Americare Home Therapy, Inc. v. Carla Hiles,
The Florida Supreme Court concluded that Section 542.335 contains a non-exclusive
list of legitimate business interests that are afforded protection and
the fact that “referral sources” was not specifically listed
did not mean that referral sources could not be legitimate business interests
entitled to protection under the statute.
The Court analyzed the statute and concluded that it revealed that the
specifically listed protected business interests had only one discernable
similarity: preventing unfair competition by protecting crucial business
interests. The Court then analogized these identified interests to those
of the referral sources at issue and concluded that the employer’s
most important business asset, referral sources, appear to follow the
legitimate business interests listed in the statute actually confirming
that referral sources “with whom it has developed substantial relationships
[ ] the ‘lifeblood' of [a] home health care business”
The Court cautioned, however, that referral sources may not be a protected
business interest in all cases and that such a determination necessarily
be made on a case by case basis. The Court held:
"In light of the foregoing, we conclude 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. Certain
industries, such as home health services, present special facts where
protecting referral sources may be necessary to prevent unfair competition…
Consequently, the determination of whether an activity qualifies as a
legitimate business interest under the statute is inherently a factual inquiry, which
is heavily industry- and context-specific… As demonstrated, the
subject statute protects a plethora of protected legitimate business interests
far beyond those explicitly listed in the subject statute. Home health
service referral sources can be counted among those protectable interests
depending on the circumstances."
This case has wide ranging application beyond the issue of referral sources.
The Florida Supreme Court has confirmed that the absence of a specific
business interest being identified in the statute does not preclude it
from being a protected business interest and opens the door to additional
litigation on an infinite number of business interests in all industries
that parties desire to protect through noncompetition agreements.
The takeaway is that noncompete agreements currently in use should be reviewed
to ensure that they remain enforceable and parties seeking to enforce
noncompetition agreements consider their opportunities to seek relief
where perhaps relief was once believed to be precluded.