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The Florida Supreme Court Has Spoken: Home Health Service Referrals May Be Protected Legitimate Business in an Action to Enforce a Noncompetition Agreement

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 protected 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.

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