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The erosion of non-solicitation agreements poses a significant challenge for home care providers, potentially undercutting their business models and profitability.
Non-solicitation agreements keep home care clients from poaching caregivers trained and supplied by agencies. In certain states with stricter rules against non-competes — like California and Connecticut — the lines between non-solicitation and non-compete agreements are being blurred.
“In talking to other agency owners — so this is not just my perspective alone — no one likes it and everyone is absolutely petrified of it,” Pansy Homecare CEO Jonah Francis told Home Health Care News.
Non-solicitation in home care
Non-solicit agreements typically specify the length of the restriction and may also include geographical limitations. However, it’s important to note that the enforceability of non-solicit agreements can vary depending on state laws and regulations, with some states placing restrictions on their use or enforcing them differently.
California, for instance, recently made changes to its state laws that make non-solicit agreements more challenging to enforce — aligning them closely with non-compete clauses — which are generally voided if they excessively limit former employees’ professional activities.
“Any kind of restriction on worker mobility over the last several years has really been under great scrutiny,” Angelo Spinola, the co-chair of the home health and home care industry group at the law firm Polsinelli, told HHCN. “The Biden Administration has wanted for there to be a ban on [non-competes] because the argument is that it limits the employee’s ability to earn a living and lowers the wage that a worker can get because they don’t have options.”
Some of the interpretations of that logic, Spinola said, have gone too far to one side.
The crux lies in discerning whether the agreement genuinely protects the company’s interests or if it’s aimed at limiting employees’ options. If it falls into the latter category, it could be deemed unlawful. Over time, the balance has shifted in favor of the employee, moving away from the employer’s advantage, Spinola explained.
In the context of home care, non-solicit agreements refer to contractual agreements between home care agencies and their employees that restrict the employees from soliciting clients or patients of the agency for a certain period after leaving their employment.
For example: a client’s cost for a personal at-home care is $32 an hour. The agency takes home an $16 margin while the caregiver is paid $16 an hour. A client can then do the math and say, “Hey, you’re getting paid $16 an hour. I’m paying $32 an hour. Why don’t I just pay you $20 an hour directly?”
In that scenario, the services of the home care agency are no longer needed.
“That caregiver and client relationship continues and the agency is completely left out and has no remedy for that,” Spinola said. “Agencies aren’t going to stand for that. They’re not going to allow that to continue to happen because they’re losing money left and right.”
Providers response
Francis said that he hasn’t yet had a lot of personal experience with the problem.
“That’s not to say that it’s not happening, but it’s just not happening as much as we fear,” Francis said. “It’s just that we all fear that it will happen, it can happen and [when it does] there’s no repercussions for it.”
Hartford, Connecticut-based Pansy Homecare is a mostly private-pay agency, but the company also has a contract with the VA, as well as a contract with the Medicaid waivers program.
Alongside his role as CEO of a home care agency, Francis serves as the vice chairman of the Homecare Association of America in Connecticut, where he advocates on behalf of providers.
Connecticut recently tightened its non-compete regulations. It requires employers to review and update existing agreements for compliance.
Francis said most providers don’t have an issue with the new non-compete regulations. Non-solicits are where the issues lie.
“We don’t want the money, time, effort and education that we’re investing in a client and caregiver to go down the drain,” Francis said. “Because, let’s face it, there are smart clients and there are smart caregivers and it has happened to us. They’re going to have that conversation. They’ll start here and have a conversation on the side with a caregiver. Before you know it, you’ve spent anywhere from $1,000 to $4,000 to start up a new assignment and you have no way to recoup that.”
With that said, it still is a rare enough occurrence that Francis is still mainly focused on simply making Pansy Homecare an employer of choice.
“The biggest step we took was when we started asking the question about value,” Francis said. “How can we continue to give value above and beyond that of just placing a caregiver with a client? I think every agency has to continue to ask that question of themselves.”
If a provider is going to lose sleep over regulation changes, then they may be focused on the wrong things.
“On the non-solicit side, from my perspective, if that is worrying you then I think you have bigger challenges within your organization,” Ryan Iwamoto, president and co-founder of the California-based 24 Hour Home Care, told HHCN. “Because regardless, if it’s someone that was in your organization that is poaching your clients, your caregivers or other staff, anyone else can do that, right? So for us, I’d rather focus our energy on things we can control.”
There’s always a chance an agency can lose a caregiver or client. That risk is always there, regardless of state non-solicitation rules.
“I might be a little naive but our perspective is, ‘Let’s just focus on the stuff that we can control and things will fall into place,'” Iwamoto said. “I would rather focus on that side of things. How do we improve our delivery of service and experience so that we get that right? How can we be a better organization in order to keep our clients and our employees?”
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