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A U.S. judge decided not to block the Federal Trade Commission’s (FTC) ban on non-compete agreements this week, continuing an ongoing saga that home care providers are paying close attention to.
Broadly, the ban on non-competes is seen as generally positive for home care leaders, who can now freely move on to better career opportunities. It likely won’t affect caregivers much, as many already work for more than one agency.
Where it will likely have an effect, however, is in non-solicitation agreements. Those keep clients from using home care agency caregivers, and then ultimately hiring those caregivers directly and cutting out the agency. A non-solicitation is different from a non-compete, of course, but some states are already viewing them in the same light, which could be a major threat to home care operators.
The FTC in April banned non-competes in a 3-2 vote. It was a major change in direction, specifically because non-compete laws were historically handled on a state level. Some states – like California and Connecticut – already had very strict laws against non-compete agreements. Other states were less strict.
But this ban comes from the federal level.
“The rulings and the positions are going beyond just the traditional non-compete agreement into client service agreements that have direct-hire provisions or penalty provisions not allowing the client to hire the caregiver away,” Angelo Spinola, the home health, home care and hospice chair at the law firm Polsinelli, recently told Home Health Care News. “That’s a big concern with what the FTC is doing – that they’re going to take that position and apply the term non-compete very broadly. If you look at the language of the final rule, it absolutely suggests that’s going to be their enforcement position.”
The aforementioned challenge to the non-compete ban was from a tree-trimming company. U.S. District Judge Kelley Hodge in Philadelphia wrote in a decision that the FTC has the power to ban practices that it deems anticompetitive.
Anticompetitive business practices – in M&A and otherwise – have been a major focus for the Biden administration.
In Medicare-certified home health care, the ban could also have significant effects.
Chip Kahn, the president and CEO of the Federation of American Hospitals, explained the health care impact shortly after the ban was voted on by the FTC. He did so through a hospital lens, but the sentiment also could apply to home health agencies.
“This final rule is a double whammy,” Kahn said. “The ban makes it more difficult to recruit and retain caregivers, while at the same time creating an anti-competitive, unlevel playing field between tax-paying and tax-exempt hospitals – a result the FTC rule precisely intended to prevent.”
Non-solicitations
Client service agreements – or non-solicitation agreements – are an essential part of home care.
Agencies pour money and resources into their caregivers to train them, upskill them and find them the right clients. Logically, it’s not right then for a client to be able to cut the agency out and hire them on their own.
But that’s already happening in certain areas. In California, for instance, agencies are having to tell clients they are no longer restricted by these agreements, according to Spinola. If agencies don’t do so, they could be fined thousands of dollars – per agreement.
“The point around direct hire clauses, that would, for me, probably be more so a concern that’s less controllable,” Care Advantage CEO Tim Hanold recently told Home Health Care News. “I know that those are things that we responsibly have in our agreements, especially for private pay. That is something that could create some issues for certain, considering how much time and energy we put into our professional caregiver workforce.”
Because of how big of a deal the non-compete ban is, it’s likely there will be a bevy of challenges to it across the country in the near-term future.
Ultimately, Spinola still believes that the ban will be done away with, or at least altered, given the history of states controlling this particular issue.
“This is state domain, not federal domain,” Spinola said. “If it were federal domain, it’s so significant that it should be something that goes through Congress, and through actual rulemaking and legislation, not through a branch where there’s really no way to stop them from doing what they want to do, other than this litigation.”
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