The Florida Supreme Court will soon release an opinion that settles whether unidentified prospective patients and referral physicians are protected legitimate business interests within the meaning of Florida’s Non-Compete Statute, § 542.335 Fla. Stat. On March 9, 2017, the Florida Supreme Court heard Oral Arguments in Americare Home Therapy, Inc., Etc. v. Hiles, a medical provider case, to address the issue. There is currently a noted conflict between the appellate courts with Third District Court of Appeal and Fourth District Court of Appeal on one side and the Fifth District Court of Appeal on the other. The Third and Fourth DCAs are generous – or pro employer – in applying the statutes protections of legitimate business interests, while the Fifth DCA is applies the protections in a narrow fashion that is generous towards former employees. Attorney Peter Mavrick represents clients in non-compete litigation in Broward, Miami-Dade, Palm Beach, Lee, Collier, and Orange counties, and this divergent case law affects litigants in these counties and throughout Florida.
While this case is in the medical provider context, the outcome of this case will have widespread implications as the statute in question addresses restrictive covenants, otherwise known as non-compete agreements, that apply to all industries. Because the statutory wording of Section 542.335 is not restricted to the medical provider context, the Florida Supreme Court’s holding will likely extend beyond the medical provider context as it will consider the “substantial relationships with specific prospective or existing customers, patients, or clients.” § 542.335 Fla. Stat. Many employers use non-competes to protect themselves from the pervasiveness of competition from a former employee who has specific insights into the employer’s operations. If unchecked, a former employee could use their knowledge to disadvantage their former employer by usurping the employer’s business opportunities, recruiting the employer’s personnel, and targeting the employer’s clients.
In Hiles v. Americare Home Therapy, Inc., 183 So. 3d 449 (Fla. 5th DCA 2015), review granted (July 8, 2016), Carla Hiles appealed a trial court order that granted a temporary injunction filed by her former employer Americare Home Therapy. Hiles resigned from Americare and started working for Americare’s direct competitor. Upon termination, Hiles took information pertaining to Americare’s referral sources. The trial court believed that restrictive covenants set forth in Hiles’ employment agreement were supported by Americare’s legitimate business interest in its substantial relationships and good will with business partners and referral sources. However, the appellate court disagreed and reversed the injunction, concluding that “Americare was not entitled to the entry of an injunction barring Hiles from ‘interfering with … Americare’s … referral sources.’” Id. at 454.
The Fifth District Court of Appeal relied on its earlier decision in Florida Hematology & Oncology v. Tummala, 927 So. 2d 135 (Fla. 5th DCA 2006), to hold that “unidentified prospective patients, and correspondingly referring physicians, do not qualify as legitimate business interests for the purpose of enforcing restrictive covenants.” 183 So. 3d at 454. The Hiles court found that referral sources and referring physicians supplied “a stream of unidentified prospective patients” with whom the former employer “had no prior relationship.” Id. Thus, the Fifth DCA refused to “to accept referral sources” as “statutorily-protected legitimate business interest[s]” because doing so would “completely circumvent the statutory directive that prospective patients are not to be recognized as a legitimate business interest.” Id. The court found that Americare’s protected “clients” or “customers” are the patients that it actually treats. See id. Thus, the Fifth DCA views referral sources as merely conduits to supply unidentified prospective clients, customers, or patients to various entities: a designation that is not within the ambit of § 542.335’s protection. See id
Facing an identical factual scenario to the Hiles case, the Fourth District Court of Appeal expressed a contrary view in Infinity Home Care, L.L.C. v. Amedisys Holding, LLC, 180 So. 3d 1060 (Fla. 4th DCA 2015). In Infinity the 4th DCA relied on the 3rd DCA’s reasoning in Southernmost Foot & Ankle Specialists, P.A. v. Torregrosa, 891 So. 2d 591n (Fla. 3d DCA 2004), to address “whether ‘referral sources’ for home health services are a protectable ‘legitimate business interest’ under section 542.335.” The Fourrth DCA took a more expansive view of the statute, finding that “Section 542.335, however, clearly states that the legitimate business interests listed in the statute are not exclusive.” In so doing, the Fourth DCA empowered itself to “examine the particular business plans, strategies, and relationships of a company in determining whether they qualify as a business interest worthy of protection.” Further, the Fourth DCA distinguished referral sources from unidentified prospective patients: categorizing the substantial relationships with the referral sources as “the lifeblood” of the employer. See id. Thus, the Fourth DCA held that “that referral sources are a protectable legitimate business interest under section 542.335, Florida Statutes.” Id. at 1067.
Employers throughout the state should await the Florida Supreme Court’s forthcoming ruling in Americare Home Therapy, Inc., Etc. v. Hiles and determine the best way to protect their referral sources as legitimate business interests.
Peter T. Mavrick has successfully represented many businesses 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; Email:firstname.lastname@example.org.