Florida Appellate Court Upholds Prohibition on Soliciting Referral Sources

It’s been a while since I’ve posted, as I was in trial and then on vacation. But I’m back and will endeavor to post regularly.

Employee mobility cases often involve the use of customer information or relationships. Many companies try to protect these relationships with restrictive covenants that prohibit competition or solicitation, or both. In Florida, restrictive covenants are governed by statute, Section 542.335, Florida Statutes.

Under this statute, a person trying to enforce a restrictive covenant must plead and prove one or more legitimate business interests. A recent Florida appellate decision, Infinity Home Care, LLC v. Amedisys Holding, LLC, addressed a twist on the typical non-solicitation case: can referral sources be a legitimate business interest? The opinion can be downloaded here.

In this case, a home healthcare company (Amedisys) sued its former employee and her new company, one of Amedisys’s competitors. The employee had signed a non-compete and non-solicitation agreement, which specifically prohibited solicitation of Amedisys’s referral sources.

While at Amedisys, the defendant’s primary job was to develop relationships with case managers at heath care facilities, who could then refer patients to Amedisys for home-care services. After leaving Amedisys, the defendant immediately started soliciting those same case managers to refer business to her new employer.

The lower court ruled that these referral sources were a legitimate business interest. Florida’s Fourth District Court of Appeal agreed. The appellate court noted that the statute lists “substantial relationships with specific prospective or existing customers, patients, or clients.” But the court found that the statute reaches beyond just these specific customer relationships:

Section 542.335, however, clearly states that the legitimate business interests listed in the statute are not exclusive. This allows the court to examine the particular business plans, strategies, and relationships of a company in determining whether they qualify as a business interest worthy of protection. . . . Here, it is undisputed that the relationships Amedisys is trying to protect are its referral sources. As the record shows, these doctors and clinics with whom it has developed substantial relationships are the “lifeblood” of its home health care business.

The appellate court acknowledged conflicting holdings among other Florida District Courts of Appeal on the issue of whether referral sources can be a legitimate business interest. But this result strikes me as the correct one. Plenty of companies rely heavily on referral sources to generate business. Given Florida’s broad restrictive-covenant statute, a company should be able to protect these types of relationships.

But given the divergent holdings, this issue is by no means settled. Any company operating in Florida that wants to protect its referral sources needs to consult with an attorney who can help make sense of the somewhat confusing law in this area.

One response

  1. Pingback: Are We Headed for a Landmark Florida Supreme Court Non-Compete Case? | Protecting Trade Secrets

Leave a Reply

%d bloggers like this: