Florida Non-Compete Agreements and Protecting Referral Sources and Patient Lists

Many businesses require their employees to sign non-compete agreements, as a condition of their employment.  In Florida, those non-compete agreements and their enforceability are governed by Section 542.335 of the Florida Statutes.   As discussed more fully below, referral sources and patient and customer lists can be legitimate business interests warranting protection under Florida law.

Many businesses require their employees to sign non-compete agreements, and referral sources and patient lists warrant protection under Florida law.

Florida’s Non-Compete Statute

The purpose of Florida’s non-compete statute is to protect certain legitimate business interests, while not totally stifling competition and free trade.  Oftentimes, disputes involving the enforceability of non-compete agreements focus on whether the employer has a protectable, legitimate business interest.

Section 542.335 of the Florida Statues defines a “legitimate business interest” to include:

  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.

The above-referenced list of legitimate business interests, however, is not exhaustive. White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC, 226 So.3d 774 (2017).  Indeed, Florida recognizes patient lists and business referrals as among those legitimate business interests warranting protection.  Ansaarie v. First Coast Cardiovascular Institute, P. A., 252 So.3d 287 (Fla. Dist. Ct. App. 2018).

Referral Sources and Patient Lists as Legitimate Business Interests

In White, health care employers brought suit against former employees seeking to prevent those employees from poaching their referral sources.  The health care employers hired marketing representatives to cultivate referral sources and trained them to market and promote their health care services.  Those employers generated “databases of referral source preferences, strategies, and procedures, which the representatives [i.e., their employees] utilize.”

While the employees in White signed confidentiality and non-compete agreements, prohibiting them from soliciting their employers’ referral sources on behalf of a competing business interest, they ignored those agreements and solicited those referral sources.  The focal point of the litigation was whether referral sources (in the home health service arena) were protected as legitimate business interests to support a restriction on competition.

The Court in White agreed with the employers that their referral sources were subject to protection under Section 542.335 of the Florida Statutes, and likened the employers’ interest to customer goodwill (which is specifically enumerated in the statute as a protected interest).

In doing so the Court stated:  “it seems obvious that allowing an employee to work for a short period, receive pay to cultivate referral sources using [the employers’] resources and then remove advantageous information to a direct competitor to solicit those same referrals – all of which was precluded by a non-compete contract that the employee signed – would not only condone but actually encourage unfair competition.”

Similarly, the court in Ansaarie analyzed whether a physician, who signed a non-compete agreement, was prohibited from soliciting his former employer’s prospective and existing patients and his former employer’s referral sources.

While the former employer in Ansaarie was unable to meet its burden as to prospective patients, it was able to demonstrate a protectable, legitimate business interest in its relationships with its existing patients and referral sources.  In so doing, the former employer presented evidence that it made “substantial investments” in developing its “existing patient, client and customer base as well as patient, client and customer goodwill.”

Non-Enumerated Business Interests Should Not Be Discounted

In light of the holdings of White and Ansaarie, parties that are litigating the enforceability of non-compete agreements must be mindful of a Florida court’s analysis of business interests that are not specifically enumerated in section 542.335 of the Florida Statues.  Indeed, as the Court stated in White, “because the statute protects more business interests than those specifically listed, courts must necessarily engage in fact-and industry-specific determinations when construing non-enumerated interests.”  Therefore, litigants (whether employer or employee) should be prepared to meet this factual inquiry head-on.

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