Referral sources to home health care agencies are protected legitimate business interests, according to the Florida Supreme Court. The decision means agencies in the state with the proper non-compete agreements no longer have to fear employees leaving and taking their referrals to other home health care providers.
The decision stems from a case in Florida involving two marketing representatives—Elizabeth White and Carla Hiles—from different home health care agencies—Mederi Caretenders Visiting Services of Southeast Florida, LLC, and Americare Home Therapy, Inc., respectively. Both employees violated their non-compete agreements by working for other agencies shortly after departing their positions. Hiles also solicited the same referral sources from Americare for her new employer, according to court documents.
“This decision should really put top sales reps on notice, as well as the competing home health care companies who hire them, that their relationships with physician and hospital referral sources may be off limits under a non-compete or non-solicit agreement,” William Cantrell, managing attorney of Cantrell PLLC, told Home Health Care News. “In light of the court ruling, the issue is no longer ‘a grey area’ in Florida.” Cantrell LLC is based in Tampa and handles non-compete disputes throughout Florida.
The cases bounced around lower courts before heading to the Supreme Court, as the district courts disagreed whether referral sources—which are a significant flow of business to home health providers—are legitimate business interests, and therefore protected from unfair competition.
“It’s now clear in the state of Florida that home health care companies can protect their referral sources from unfair competition from marketing or sales people who have signed non-compete [disclosures] with them,” Leonard Samuels, partner at law firm Bergern Singerman, told Home Health Care News.
In other words, now non-compete clauses can be enforced in Florida for marketing representatives interfering with referral sources.
“In the home health care setting, with the way the business works, it’s difficult to argue [referral sources] are not a legitimate business interest, but the court did note it’s going to be on a case-by-case basis,” Samuels said. “In some instances, the referral source would not be a protected business interest.”
However, those instances are likely to come from outside the home health care space, according to Samuels, as other providers are not as reliant on referral sources for business. Though, the statute that governs non-compete and non-solicit agreements leaves some wiggle room for argument over referral sources.
“Moving forward… when a home health care company and its former employee are fighting over whether certain referral sources are off-limits, the facts and circumstances of that former employee’s relationship with the referral sources at issue must be closely securitized,” Cantrell said. “For example, if a sales rep only had nominal contact with a certain referral source, it is more likely that a Florida court will find that the agreement purporting to prohibit the sales rep from soliciting the referral sources is unenforceable.”
The decision is likely to bring clarity to home health providers in the state. In Florida, there are more than 1,050 Medicare-certified home health care agencies, according to recent data from the Centers for Medicare & Medicaid Services (CMS).
While states vary on their use of non-compete clauses among home health care workers, the protections granted in Florida could strengthen arguments to make referral sources legitimate business interests elsewhere.
“This case is another brick in the wall making it harder for employees to get out of their non-compete and non-solicit agreements,” Cantrell said. “And for Florida home health care companies who operate nationally, this case provides even more reasons to litigate these types of disputes in Florida when possible.”
Written by Amy Baxter