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President Joe Biden’s recent executive order on “Promoting Competition in the American Economy” has, overall, 72 separate initiatives that it is looking to push forward.
But one of the main ones takes on something that is very prevalent in home-based care, often from the executive level on down: non-compete agreements. Specifically, the executive order requests the Federal Trade Commission (FTC) to “ban or limit” non-compete agreements all together.
“[This will] make it easier to change jobs and help raise wages by banning or limiting non-compete agreements and unnecessary, cumbersome occupational licensing requirements that impede economic mobility,” the executive order reads.
Although nothing is set in stone, if the White House’s wishes materialize — either partially or fully — it will significantly change the way businesses operate from a hiring standpoint.
“If former employees start giving away your secrets, or special sauce — we don’t want that to happen,” Peter Ross, the CEO of Senior Helpers, told Home Health Care News. “But I’m a big believer that this is a right-to-work country, and I really do think that that’s how it should be. And so I don’t necessarily disagree with the executive order.”
Maryland-based Senior Helpers is a home care provider that has more than 320 franchised and corporate-owned locations in 44 states across the U.S., as well as in Canada and Australia. Earlier this year, the company was acquired by the investment arm of Advocate Aurora Health, Advocate Aurora Enterprises.
The White House executive order also aims to take on the trend of corporate consolidation, but home-based care insiders don’t believe that will affect either the home health or home care sectors, which are still largely fragmented.
Non-competes, on the other hand, are pretty standard at the executive level. And although caregivers often work for more than one agency in order to make ends meet, they’re sometimes subject to those as well.
“Tens of millions of Americans … are required to sign non-compete agreements as a condition of getting a job, which makes it harder for them to switch to better-paying options,” the executive order reads.
Broadly, a non-compete clause with one company keeps an employee from accepting a role at another company that is considered a competitor in the same industry. Sometimes referred to as “restrictive covenants,” the agreements vary in detail, expiring after years for some cases and less time in others.
“It’s much more common on the executive level,” Angelo Spinola, co-chair of the home health and home care industry group at the law firm Polsinelli, told HHCN. “Especially for people in marketing and sales roles, because there’s a lot of — especially now — movement back and forth between competitive companies. We get calls all the time, where one of our clients has hired people away from another client and somebody is bent out of shape, and they want to sue or send a demand letter. That’s happening a lot.”
That back-and-forth movement has led to more at-home care companies trying to curtail it.
“With this kind of shortage the way that it is, there is even more of a focus on trying to do that,” Spinola said. “Other providers in the industry are trying to prevent the executive level from moving and competing.”
A recent example of a non-compete agreement at work in home care: former FirstLight Home Care CEO Jeff Bevis. Bevis left the national home care franchiser in November 2020.
“I do have some non-compete limitations that are fairly narrow,” Bevis told HHCN at the time. “But I’ve already had discussions with people contacting me from home care-technology [organizations] that do remote patient monitoring and telehealth — the types of services that are not home care-specific.”
While many companies view these agreements as necessary, some employees feel that the agreements are unfair, restricting them from pursuing better positions in the industry they work within.
These clauses also vary from state to state. Physicians, for instance, are exempt from non-compete agreements in many states, and some states are generally more restrictive on the types of non-competes allowed. California, Oklahoma and North Dakota have already banned non-competes entirely.
“The way that restrictive covenant law works today, irrespective of that executive order and getting the FTC involved, it’s very state-driven,” Spinola said. “So one agreement might work in one state, and that same agreement wouldn’t be enforceable in another. And that’s just a product of the states trying to develop a balance for what they think is a fair between a restriction of somebody’s trade, preventing them from performing the work that they do, and protecting the business interests of the company.”
The executive order is undoubtedly employee-friendly, and it sends a signal to companies that the Biden administration, in particular, is working to limit the amount of power they have over workers who are trying to continue their careers in the same trade.
It’s still not clear how far the executive order will get. It’s unlikely, for various reasons, that a complete ban on non-competes will be enforced federally by the FTC in the end.
“It’s hard to say how this will go, because there’s not a lot of detail in the executive order,” Spinola said. “The FTC has looked at this before, and whether there should be any kind of action taken at the federal level, and they didn’t follow through with it. So it would really turn the law on its head to make this a federal mandate, rather than directed by the states.”
There would need to be a notice and comment period if the FTC did try to move forward with the law. Even then, it’s unclear whether the agency has the full authority to completely ban non-compete agreements.
“There would likely be a legal challenge, if they get that far,” Spinola said. “As far as the likelihood, I think it’s less likely that this is not something that would happen anytime in the near term, or in a matter of months.”
“If former employees start giving away your secrets, or special sauce — we don’t want that to happen.”
Peter Ross, CEO of Senior Helpers
Non-compete agreements in home-based care
Even if the FTC does take serious action against non-competes, Ross doesn’t see it affecting home care in a major way.
“I just don’t think you see that as much in home care at all,” Ross said. “I don’t remember it being an issue in the 20 years in the [industry]. So I think you’re pretty much free to work wherever you want to work if you’re not negatively impacting our business, or don’t take any trade secrets that you’ve learned while working for us.”
Others, including Spinola, have predicted an increase in non-compete agreements due to dire workforce shortages in home-based care.
For caregivers, non-competes are usually not in place to keep them from working for other companies. Instead, agreements are used to keep them from cutting out the company by working with clients directly.
In those cases, Senior Helpers requires a hefty buy-out from the client, or else it restricts the caregiver from doing so.
“What we do have is a service agreement with a client and their family, which is mainly for privacy. We want to make sure we protect health care information and things like that,” Ross said. “But mainly, what we don’t want is to have the client and the caregiver end up trying to work directly together.”
It’s likely that those agreements will continue, no matter how far the executive order gets. Without them, home-based care agencies could be hurt considerably by the underground caregiving market.
What most insiders and executives hope, instead, is that the executive order makes non-competes more fair overall, creating harmony between a provider’s interests and the employee’s.
“My personal view is that these restrictive covenants should be narrowly tailored,” Spinola said. “They should be designed around protection of your company, and I think there’s a vehicle for that. I think that makes sense. I think that is fair. But if you go too far into preventing somebody from working in the industry at all, there are issues there.”
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