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Home care providers have always taken measures to ensure that they’re able to hold on to staff through clauses in client-services contracts prohibiting the direct hire of a caregiver. That’s especially true amid labor shortages.
Now, various government agencies are cracking down on these measures.
“Government authorities, such as the Federal Trade Commission (FTC), and in some cases the Department of Justice, State Department of Justices’, and the Department of Labor are focused in on those type of provisions with the angle or the thought that’s a restriction,” Angelo Spinola, home health, home care and hospice chair at the law firm Polsinelli, told Home Health Care News.
It’s not uncommon for home care providers to include a no-hire clause in a client-services contract that prevents a client or their family from hiring, either directly or indirectly, any employee of said company for a certain period of time.
“The rationale behind it is they’ve provided a patient, or a family, with a caregiver that they like, and who’s doing a good job,” private-practice attorney Elizabeth E. Hogue told HHCN. “It’s very tempting for the patient or family to say, ‘Well, I’ll just pay them directly.’”
Typically, the contract states that clients who violate the clause will be required to pay a penalty fine. These clients also open themselves up to potential litigation.
Lately, government entities have been paying attention to these types of clauses that are found in client-services contracts.
In fact, there’s been an uptick in investigations, subpoenas and document requests for client-services contracts, according to Spinola.
“Normally, those would be focused on restrictive covenants with the caregivers,” he said. “But what some of these investigative demands are asking for now are the client agreements, [in order] to see what kind of restrictions may exist with respect to the caregivers.”
Home care providers operating in states with tougher restrictions face greater risks.
“What’s happening is that some states are looking at that client-service agreement as a restriction similar to a no-poach agreement or restriction on the employee’s ability to work anywhere, or for anyone they want to,” Spinola said. “In a state that has a ban on non-compete — California and Connecticut are examples — that’s creating risk for the agencies who are now being investigated by these government organizations.”
On a federal level, the Biden administration issued an executive order, which stated that non-compete agreements restrict employees’ ability to switch jobs.
While non-compete agreements are different from no-hire clauses, it’s safe to say that home care providers are being watched more closely when it comes to employment practices.
For providers, it will be important to ensure that the company’s client-services contracts comply with the laws in the states they operate in.
Spinola also suggests that providers should move away from penalty fines.
“Is there an alternative way to draft that language, so that it’s not a penalty?” he said. “Instead, you’re talking about an alternative to receiving the services of the agency. In other words, a direct hire provision, where now, the client – if they want to hire a caregiver directly – can do that. The contractual terms around hiring that way are X. It’s a lump-sum payment instead of paying out for those services. You’re effectively doing what a placement agency would do.”
Ultimately, Spinola believes that it’s important to focus on the business versus limiting caregivers.
“You’re dancing on the head of a pin of a needle and trying to figure out what can we do, what’s reasonable, and the more that’s focused on protecting your business, and your investment into the caregiver, as opposed to restricting the caregiver — the more likely you are to succeed,” he said.
As home care providers continue to see more oversight, one thing Spinola and his colleagues are working on is trying to give the government a better understanding of the industry.
“[It’s about] getting them to understand the work that the agency is doing, to vet the caregiver and place the caregiver with the client,” he said. “We’re not really talking about a restriction on the caregivers rights and where they can work, but a protection of the business … it’s not fair for a client to take that value away from the agency without paying for it. I think that’s the distinction that we’ve got to get the government to understand.”