• Florida Supreme Court’s Ruling: Potential Impact to your Non-Compete and Confidentiality Agreement.
  • September 25, 2017 | Author: Suketa K. Shah
  • Law Firm: Shankman Leone, P.A. - Tampa Office
  • Employers all across Florida are reviewing their employee non-compete agreement in response to the Florida Supreme Court unanimous ruling protecting referral sources under employee Non-Compete Agreements. In White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC, et al.,and Americare Home Therapy, Inc., v. Hiles, the Florida Supreme Court held that referral sources are legitimate business interest that may be protected under Florida Statute 542.335 depending upon the context and proof offered.

    The ruling consolidates two cases in which different home health care companies had sought to enforce non-compete agreements against former employees whose primary job responsibilities required cultivating relationships with referral sources. In each case the former employee joined a competing home health care company and directly solicited the former employer’s referral source which resulted in lower referrals and a loss of revenue for Mederi Caretenders and Americare Home Therapy.

    The Court took great measure to discuss the importance of referral sources in the home health care arena as the companies depend upon their referral sources to obtain patients. Specifically stating, “…allowing an employee to work for a short period, receive pay to cultivate referral sources using an [home health care companies] resources, and then remove advantageous information to a direct competitor to solicit those same referrals…” which is precluded by a non-compete would condone and encourage unfair competition.

    In Florida the general rule for protecting business interest under section 542.335(1)(b)3 is that the legitimate business interest must be a substantial relationship with particular, identifiable, individual. Previously, courts relied on 542.335 Florida Statute enumerated interests to determine if the plaintiff has a viable business interest, under the White standard trial courts will have to determine case-by-case, if there are any special facts that make it necessary to prevent unfair competition in the industries involved.

    The standard set out in White leaves the issue of “what is a legitimate business interest” open to factual discussion and to a trial court’s discretion. This will open the door to allow employers, in a myriad of different industries, the opportunity to protect their legitimate business interest. As a Labor & Employment lawyers across the state anticipate a new wave of enforcement suits, the trial courts will have to determine exactly which industries and what interests are actually protected under Florida law. Employers should closely review their employees non-compete and confidentiality agreements to ensure they include referral sources along with other business interest and trade secrets.

    [1] White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC, et al., SC16-28, consolidated with Americare Home Therapy, Inc., v. Hiles, SC16-400 (September 14, 2017).

    [2] Id. at 23.

    [3] Id. at 15.

    [4] Id. at 19.

    [5] University of Florida Board of Trustees v. Sanal, 837 So, 2d 512, 516 (Fla. 1st DCA 2003).

    [6] The Florida Supreme Court overruled Florida hematology & Oncology v. Tummala, 927 So.2s 135, 139 (Fla. 5th DCA 2006) which held that recognition of referral sources as a protected legitimate business interest is contrary to the plain language of section 542.335.