DISTRICT COURT OF APPEAL NON-COMPETE LAW SPLIT RESOLVED: IN HOME HEALTH CARE SERVICE INDUSTRY, REFERRAL SOURCES ARE PROTECTABLE LEGITIMATE BUSINESS INTERESTS

The Mavrick Law Firm’s earlier publication, Florida Non-Compete: Supreme Court To Resolve Conflicting Appellate Court Decisions, examined a conflict between the Fourth District Court of Appeal and the Fifth District Court of Appeal that centered around of the protection of referral sources in the home healthcare industry by Florida’s Non-Compete Statute, § 542.335, Fla. Stat. The Fourth DCA had an expansive view of the statute, finding § 542.335’s enumerated list of legitimate business interests to be non-exclusive. In so doing, the Fourth DCA distinguished referral sources from unidentified prospective patients: using a context-based analysis that viewed the substantial relationships with the referral sources as “the lifeblood” of the industries’ employers. Infinity Home Care, L.L.C. v. Amedisys Holding, LLC, 180 So. 3d 1060, 1067 (Fla. 4th DCA 2015). Conversely, the Fifth DCA found § 542.335’s enumerated list of legitimate business interests to be limited to the plain language of statute: finding that “unidentified prospective patients, and correspondingly referring physicians, do not qualify as legitimate business interests for the purpose of enforcing restrictive covenants.” Hiles v. Americare Home Therapy, Inc., 183 So. 3d 449, 454 (Fla. 5th DCA 2015). The Mavrick Law Firm regularly represents businesses, their owners, and former employees who become entrepreneurs in non-compete disputes in Fort Lauderdale, Miami, and Palm Beach. Mr. Mavrick has successfully handled many cases concerning enforcement of and defense against non-compete agreements.

Resolving the conflict, the Florida Supreme Court, in White v. Mederi Caretenders Visiting Services of Se. Florida, LLC, SC16-28, 2017 WL 4053930 (Fla. Sept. 14, 2017), sided with the Fourth DCA and held that “home health service referral sources can be a protected legitimate business interest under the statute.” Id. at *1. The court explained that section 542.335’s listed legitimate business interests are illustrative and non-exhaustive. In other words, courts are able to expand the list of “legitimate business interests” beyond those explicitly enumerated in Florida’s non-compete statute. Thus, the statute can protect non-enumerated legitimate business interests in certain circumstances, which depend upon industry-specific and factual contexts. Accordingly, employers now have an easier task of tailoring restrictive covenants to protect their context-specific legitimate business interests.

At the beginning of its analysis, the court first analyzed section 542.335 to determine if the statute provides protection for non-enumerated interests. Quashing the Fifth DCA’s decision in Hiles, the court explained that “[r]eferral sources are simply not antithetical to the plain language of the statute because they are different interests than those contemplated by section 542.335(1)(b)3.” Id. at*5. The court further explained that “barring the protection of interests not specifically precluded by the statute is problematic because that would essentially convert section 542.335(1)(b)3 into an unintended and silent limitation on the statute’s non-exhaustive list definition.” Id. at *6. Further, the court sought out the legislative intent of the § 542.335 by reviewing the plain language of the statute: finding that the list of legitimate business interests was non-exhaustive based on the statute’s language, which provides that “[t]he term ‘legitimate business interest includes, but is not limited to…” Id. The court concluded that the list of legitimate business interests was illustrative and does not limit judicial finding of additional legitimate business interests: requiring courts to “engage in fact -and industry-specific determinations when construing non-enumerated interests.” Id. at *7.

Section 542.335 ’s purpose is to prevent “unfair competition by protecting crucial business interests.” 2017 WL 4053930 at *7. While the Florida Supreme Court expanded § 542.335’s protection of legitimate business interests, the court stated that the expansion was not without limitation. The Florida Supreme Court instructed the lower courts to balance an employer’s legitimate business interests with “a person’s inalienable right to work.” Id. at*8 (citing Art. I, § 2, Fla. Const.). Moreover, the court reminded potential litigants that “the scope of unprotected business interests is well established” and that the statute does not protect non-compete agreements “whose sole purpose is to prevent competition per se” Id. Accordingly, “[f]or an employer to be entitled to protection, ‘there must be special facts present’ over and above ordinary competition such that, absent a non-competition agreement, ‘the employee would gain an unfair advantage in future competition with the employer.’” Id. In the same vein, the court highlighted § 542.335’s protection from overly restrictive non-compete agreements. “Section 542.335 commands courts to modify” non-competition agreements that are “overbroad, overlong, or otherwise not reasonably necessary to protect” a “legitimate business interest.” Id. at 9. Therefore, employers should not view the court’s endorsement of an expansive view of § 542.335’s protection as a license to preclude all competition from a former employee. “[T]he fact that referral sources [or other critical business interests] can constitute a legitimate business interest does not automatically satisfy all possible factual issues” as business interests that are capable of protection in some circumstances could unprotected in others. 2017 WL 4053930 at *9.

Even though the Florida Supreme Court’s holding in White explicitly concerned referral sources in the home health service industry, the holding has applicability outside of the home health service industry. A business interest can be legitimate and protectable in some industries and in some factual scenarios, but not in others. The court explained that because section 542.335 provides for “a plethora of [non-enumerated] protected legitimate business interests” that are applicable in a variety of commercial contexts, courts are free to examine the “legitimacy of a particular business interest – in conjunction with the industry context and evidence adduced.” 2017 WL 4053930 at *9. Thus litigants disputing the legitimacy of previously unprotected business interests must present evidence that will allow the trial courts to engage in the context-based factual analysis.

In sum, the Florida Supreme Court’s decision in White expanded protections for employers, but it also tempered the expansion with an industry-specific context-based analysis that is balanced with the ideals of fair competition. Employees seeking to avoid non-compete agreements should be aware of the fact that employers have an easier task of defining legitimate business under this more expansive interpretation of the statute. Employers, however, should be aware of the fact that many legitimate interests are well-defined, and to the extent that additional or uncontemplated protectable legitimate business interests exist, they will be subject to a context-based analysis that will be balanced against consideration of the former employee’s inalienable right to work.

Peter T. Mavrick has successfully represented many businesses and individuals in non-competition covenant litigation. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website:www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.