Legal: Non-Compete Agreement Trends

The home care industry has often asked marketers/liaisons to sign non-compete agreements that limit their ability to take positions with competitors. Key executives are also frequently asked to sign non-compete agreements or restrictive covenants. Non-compete agreements are coming under increasing fire; it is fair to say that they may be disfavored, especially in the healthcare industry.

State’s Role

Non-compete agreements are often regulated by the states. It is imperative, therefore, to review state laws and regulations to understand limitations on non-compete agreements and their enforcement. State requirements vary considerably, so review of each state’s requirements is necessary.

There are, however, a few general areas that deserve providers’ attention:

• Notice periods
• Requirements to pay consideration
• Limitations on enforcement

With regard to requirements for notice periods, some states require that potential new hires must be presented with written notices stating that they have a specified period time to review restrictive covenants before accepting employment offers. State laws may also require notices to state that potential employees should seek legal counsel to review restrictive covenants. States may sometimes include requirements to provide details about the rights of potential employees under laws governing non-compete agreements.

Prospective and/or current employers may also be required to pay consideration in exchange for execution of non-compete agreements. Consideration can take many forms, including cash payment and continued employment.

The enforceability of non-compete agreements may be limited based on employees’ rates of pay. Minimum amounts that employees must earn for employers to impose restrictive covenants may vary by state or change annually. Some states limit the period during which non-compete agreements can be enforced based on the length of time employees have worked for employers. Some limit the length of time restrictive covenants can be enforced after termination of employment, and the types and classes of employees against whom restrictive covenants can be enforced.

Although the trend is certainly against non-compete agreements or restrictive covenants in the health care industry, some state courts have affirmed their use. For example, the Florida Supreme Court ruled that home care referral sources can be protected legitimate business interests under applicable statutes in Florida and that restrictive covenants in contracts with marketers may be enforced [Elizabeth White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC et al; Americare Home Therapy, Inc. v. Carla Hiles, No. SC16-28, September 14, 2017].

A key question for home care providers now is, however, whether restrictive covenants for marketers/liaisons are necessary in view of the inability to serve all the patients referred due to staffing shortages.

Again, regarding laws related to non-compete agreements, state requirements usually “rule.” Providers must carefully review and adhere to them.

Copyright © 2021 Elizabeth E. Hogue, Esq. All rights reserved. No portion of this material may be reproduced in any form without permission.