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Employer’s Right to Protect Referral Sources

The Florida Supreme Court recently strengthened an employer’s right to protect “referral sources” from competitors. In White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC, 2017 WL 4053930 (Fla. 2017), the Court held a referral source may constitute a “legitimate business interest” as that term is used in § 542.335, Florida Statutes. The decision resolves a long-standing conflict between Florida’s District Courts of Appeal.

In light of the Court’s decision, healthcare providers that rely on referral sources may want to review their non-competition agreements to ensure that they capture this important and now more tangible protection.

Mederi Caretenders addresses breach of contract actions filed against two marketing professionals employed by home health companies. Both signed non-compete agreements with their respective employers and left their employers to work for competitors within the geographic zone of their agreements. Both called on the referral sources of their former employers allegedly injuring their former employers’ businesses. The core issue in both cases was whether such referral sources constituted legitimate business interests under the Florida Statutes.

Courts struggled with this issue because § 542.335(1)(b)3, Florida Statutes, identifies “substantial relationships with specific prospective or existing customers, patients, or clients” as a legitimate business interest. Courts have held that, in contrast, referral sources cannot be legitimate business interests because they supply “a stream of unidentified prospective patients? .” Florida Hematology & Oncology v. Tummala, 927 So.2d 135, 139 (Fla. 5th DCA 2006) (emphasis added).

Mederi Caretenders’ turned on a finding that § 542.335(1)(b), Florida Statutes, does not present an exhaustive list of legitimate business interests. The Court held therefore that referral sources can, in appropriate circumstances, be protected legitimate business interests and remanded the underlying breach of contract disputes back to their respective trial courts for further fact finding.

Contact Asghar Syed or John MacLennan in the firm’s Labor and Employment department to discuss Mederi Caretenders or issues related to non-compete agreements.

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