Skip to Content
Menu Toggle
Noncompete Agreements: Protecting Referral Relationships as Legitimate Business Interests
subscribe to legal alerts

subscribe to our blogs

sign up now

Media Contacts

Charles B. Jimerson
Managing Partner

Jimerson Birr welcomes inquiries from the media and do our best to respond to deadlines. If you are interested in speaking to a Jimerson Birr lawyer or want general information about the firm, our practice areas, lawyers, publications, or events, please contact us via email or telephone for assistance at (904) 389-0050.

Noncompete Agreements: Protecting Referral Relationships as Legitimate Business Interests

January 31, 2023 Professional Services Industry Legal Blog

Reading Time: 6 minutes

Referral relationships are a valuable business asset that can be difficult to protect with noncompete agreements. Depending on whether your company is seeking to enforce a noncompete agreement or defend against its enforcement, that difficulty can act to your detriment or in your favor. However, Florida courts have evaluated referral relationships as legitimate business interests and established a framework to navigate in your company’s best interests. This article surveys the general principles associated with noncompete statutes for those that are unfamiliar, and then analyzes enforcement of noncompete agreements to specifically protect referral relationships as business assets. 

Man holding something in his hands

Section 542.335, Florida Statutes, prescribes numerous requirements which must be satisfied to enforce a noncompete agreement. First, the noncompete agreement, or “restrictive covenant,” must be “set forth in a writing signed by the person against whom enforcement is sought.” § 542.335, Fla. Stat. Second, the restrictive covenant must be reasonable in relation to “time, area, and line of business.” § 542.335, Fla. Stat. Third, “Under Section 542.335 of the Florida Statutes, restrictive covenants are valid if the employer can prove: (1) the existence of one or more legitimate business interests justifying the restrictive covenant; and (2) that the contractually specified restraint is reasonably necessary to protect the established interests of the employer.” Autonation, Inc. v. O’Brien, 347 F. Supp. 2d 1299, 1304 (S.D. Fla. 2004) (interpreting Florida law) (emphasis added).

What specifically constitutes a “legitimate business interest” changes depending on the industry in which enforcement of the noncompete agreement is sought. Legitimate business interests are defined generally by Florida law to include, but not be 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:
    1. An ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress”;
    2. A specific geographic location; or
    3. A specific marketing or trade area.
  5. Extraordinary or specialized training.
  • 542.335(1)(b), Fla. Stat. 

Moreover, certain assets not enumerated in Section 542.335 can still constitute protectable legitimate business interests. White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 774, 784–85 (Fla. 2017). An unenumerated legitimate business interest warranting protection is a business asset that could give a competitor an unfair advantage if it is misappropriated by the competitor:

Beyond the statutory list, section 542.335 provides no specification for what non-enumerated business interests are legitimate. Moreover, the legislative history is not helpful. Still, this Court has some additional direction:

A review of those examples [in section 542.335(1)(b) ] confirms that a “legitimate business interest” is an identifiable business asset that constitutes or represents an investment by the proponent of the restriction such that, if that asset were misappropriated by a competitor (i.e., taken without compensation), its use in competition against its former owner would be “unfair competition.” Put another way, a “legitimate business interest” is a business asset that, if misappropriated, would give its new owner an unfair competitive advantage over its former owner.

Id. (citing John A. Grant, Jr. & Thomas T. Steele, Restrictive Covenants: Florida Returns to the Original “Unfair Competition” Approach for the 21st Century, 70 Fla. B.J. 53, 54 (Nov. 1996)) (emphasis added).

Generally speaking, Florida courts recognize the value of intangible business assets, like the relationships that businesses maintain with their customers, suppliers, and vendors. See Quirch Foods LLC v. Broce, 314 So. 3d 327, 342-43 (Fla. 3d DCA 2020). It would follow, then, that employers should be able to invoke the broad definition of legitimate business interests established by the White and Quirch cases to protect referral relationships without questions. However, an employer merely stating that something is a legitimate business interest will not make it automatically protectable by a noncompete agreement. For instance, even commonly recognized legitimate business interests like customer lists and operations information may not be legitimate business interests in all circumstances. GPS Indus., LLC v. Lewis, 691 F. Supp. 2d 1327, 1335 (M.D. Fla. 2010) (“The mere identity of clients and pricing terms…may not be sufficient to justify a restrictive covenant.”). 

When an employer takes the right actions to cultivate and protect its referral sources, Florida law supports qualifying them as legitimate business interests. Veterinary Orthopedic Implants, Inc. v. Haas, No. 3:20-CV-868-J-34MCR, 2020 WL 5369087, at *2 (M.D. Fla. Sept. 8, 2020). In Haas, the employer sold veterinary orthopedic products. Id. at *2. The employer described the unique circumstances surrounding referral sources in that industry to explain their unique value: 

[The employer explained that] in this industry “most of the large customers making purchasing decisions that result in the bulk of a seller’s revenue are found in institutions,” such as university-based veterinary medical centers, veterinary clinics associated with zoos or wildlife parks, or specialized private veterinary practice groups in large metropolitan areas. [internal citation]. According to [the employer], customers in this industry are “situated to be repeat buyers.” [internal citation]. Because of these dynamics, “the decision-making leaders of these larger organizations [are] the most prized customers in [the employer’s] industry,” [internal citation] and [the employer] has … developed “through years of hard work and expense,” a referral network of “customers and industry allies, professionals in the veterinary orthopedic industry who, because they make the choice to prefer or follow [the employer’s] goodwill, also make the choice to refer new prospective customers to [the employer], and to connect [the employer] to new prospects through networking.” 

Id. at *2. 

In light of the employer’s testimony, the court held that the referral sources were legitimate business interests which supported enforcement of the noncompete agreement. Id. at *11. In addition to the time and resources expended to cultivate the referral sources, the court also relied upon the employer’s testimony that “the identities of these referral sources and their contact information is kept confidential[.]” Id. at *11. 


The enforcement of a noncompete agreement often turns on whether an employer’s alleged asset qualifies as a legitimate business interest. As shown above, when (i) an employer works in an industry that possesses repeat buyers, (ii) develops a referral network “through years of hard work and experience,” and (iii) takes measures to keep the referral sources confidential, the employer may be able to qualify those referral sources as legitimate business interests justifying the enforcement of a noncompete agreement. Notably, one of these factors requires employers to have already implemented certain corporate policies related to maintaining confidentiality before seeking to enforce a noncompete agreement to solidify its enforceability. Accordingly, it is important for companies dealing with noncompete agreements to consult legal counsel before enforcement (for or against) is sought to ensure that (1) corporate policies are in place to protect the company and (2) enforcement or defense of the noncompete agreement has the highest chance of success.

we’re here to help

Contact Us