Florida Healthcare Litigation Update: Health Care Referral Sources Constitute a “Legitimate Business Interest” Entitled to Protection in Non-Compete Agreements…At Least, For Now.
Monday, October 12, 2015
In Infinity Home Care, L.L.C. and Sylvia Forjet, et. al. v. Amedisys Holding, LLC, Florida’s Fourth District Court of Appeals decided whether health care referral sources were a protectable “legitimate business interest” under the Florida statute governing the enforceability of employer/employee non-compete agreements (also known as “restrictive covenants”). Adding to a “district split,” the Fourth District Court of Appeal sided with the Third District Court of Appeals in Southernmost Foot & Ankle Specialists, P.A. v. Torregrosa, 891 So. 2d 591 (Fla. 3d DCA 2004) (rather than the Fifth District Court of Appeals in Florida Hematology & Oncology v. Tummala, 927 So. 2d 135 (Fla. 5th DCA 2006)) finding that “referral sources are a protectable legitimate business interest under section 542.335, Florida Statutes.”
In January of 2013, Sylvia Forjet began working for Amedisys Holding, LLC (“Amedisys”), a home health care company, as a Care Transition Coordinator in Broward County, Florida. Forjet’s job responsibilities included the development and maintenance of her employer’s relationships with individual case managers at certain health care facilities that referred their patients to Amedisys for home health services. Upon hiring, Amedisys required Forjet to sign a Non-Compete Agreement. The Non-Compete Agreement stated, among other things, that for a one (1) year period following Forjet’s employment, Forjet was precluded from communicating with Amedisys referral sources in Broward County, Florida.
In June of 2014, Forjet left Amedisys to work for Infinity Home Care, L.L.C. (“Infinity”), a separate home health care company which competes with Amedisys. Forjet immediately began to solicit referrals from sources previously tapped while working for Amedisys.
Amedisys brought suit against Forjet for breach of the non-compete and against Infinity for tortious interference. Infinity moved to dismiss the complaint, arguing that “referral sources are not a protectable legitimate business interest under section 542.335, Florida Statutes.”
Florida Statute § 542.335 (“Valid restraints of trade or commerce) states, in pertinent part:
(b) The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant. The term “legitimate business interest” includes, but is not limited to:
1. Trade secrets, as defined in s. 688.002(4).
2. Valuable confidential business or professional information that otherwise does not qualify as trade secrets.
3. Substantial relationships with specific prospective or existing customers, patients, or clients.
4. Customer, patient, or client goodwill associated with:
a. An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress”;
b. A specific geographic location; or
c. A specific marketing or trade area.
5. Extraordinary or specialized training.
Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.
Following an evidentiary hearing, the trial court found that the non-compete agreement was enforceable in its protection of a referral sources as a legitimate business interest under Fla. Stat. § 542.335(b), reasonable in scope, and that Forjet was violating her contractual obligations.
The Court reasoned that the list contained in Fla. Stat. § 542.335 is not exclusive and, therefore, permits a lower court to examine particular business plans, strategies, and relationships of a company in determining whether they qualify as legitimate business interests worthy of protection. In this instance, the Court noted (and the record showed) that in the home health care context, referral sources are the “lifeblood” of the business. Therefore, certifying conflict with the Fifth District Court of Appeal’s decision in Tummala, the Fourth District Court of Appeal affirmed. (In Tummala, the Fifth DCA held that referring physicians do not constitute a legitimate business interest under Fla. Stat. § 542.335(b)3. In reaching its holding, the Court relied on the express language of subsection (b)3 and the lack of specificity associated with patients derived from referral sources, without considering the non-exhaustive nature of the statute.)
The Court’s decision adds to the growing uncertainty in Florida with respect to non-compete agreements and their applicability to health care referral sources. Until the Florida Supreme Court resolves this statewide conflict, Florida health care providers will be well-served by having competent attorneys review both existing and anticipated non-compete agreements seeking to protect valuable health care referral sources in order to maximize their enforceability. Health care providers must also be certain that all referral relationships comply with both state and federal anti-kickback regulations, as failing to do so can have significant consequences.
Fuerst Ittleman David and Joseph, P.L. has extensive experience drafting non-compete agreements and assisting clients in complying with applicable health care regulations. If we can be of assistance to you, email us at email@example.com or call 305.350.5690.