December 11, 2017

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Referral Sources Held to Be Protectable Legitimate Business Interests

The Florida Supreme Court ruled last week that referral sources in the home healthcare industry can be protected legitimate business interests under the state law governing non-compete agreements, thus finding enforceable such a restriction on a former marketing employee who left for a competitor.

Although the Florida statute in question (542.335) does not specifically list “referral sources” as one of the five categories of business interests subject to protection, the Court notes that those enumerated categories are prefaced by the phrase “including, but not limited to” thereby finding that the list is not meant to be exhaustive and may necessarily include other interests which may justify enforceability of a non-compete agreement.

As is often the case in properly reasoned restrictive covenant decisions, Courts must necessarily engage in fact and industry specific determinations when finding whether the restrictions are necessary to protect a legitimate business interest of the former employee or if they are merely anti-competitive by preventing a former employee from fairly earning a livelihood in their chosen industry.  The Florida Supreme Court went through such analysis here finding that the principal responsibility of marketing representatives of home health service companies was to cultivate relationships with referral sources such as doctors, case managers and referral coordinators in the hope of securing future patient referrals.  Such companies specifically train their representatives to target such referral resources and provide them with access to internal databases of referral source preferences, strategies, and procedures for them to utilize.  This investment in their employees and referral source databases was sufficient to establish a protectable legitimate business interest under the Florida non-compete statute warranting enforcement of the restrictive covenant in question.

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PETER L. ALTIERI is a Member of the Firm at Epstein Becker Green, in the Litigation and Labor and Employment practices. Based in the firm's New York office, where he serves as the Managing Shareholder, he concentrates on complex commercial litigation, antitrust/trade regulation, trade secrets, and employment-related litigation. Mr. Altieri represents clients in myriad industries, including financial services, managed care, trucking, and insurance. Routinely appearing before arbitrators, federal and state courts, and administrative agencies, he has handled mediations,...

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