August 1, 2024  – A U.S. judge has decided not to block the Federal Trade Commission’s (FTC) ban on non-compete agreements, which could lead to potential upheavals in the home care industry. A lawsuit challenging the initial FTC decision was brought forward, but U.S. District Judge Kelley Hodge in Philadelphia affirmed the FTC’s authority to prohibit practices it finds anticompetitive.

Historically, non-compete agreements have restricted employees from moving freely between jobs within the same industry. The FTC, in a 3-2 vote this April, aimed to eliminate these restrictions at the federal level. While some states like California and Connecticut already enforce bans on non-competes, the new federal mandate applies across the country.

The implications of this ruling extend beyond employment contracts to non-solicitation agreements. These prevent clients from directly hiring caregivers employed by agencies, effectively cutting out the middleman. This aspect of the ruling is particularly concerning for home care operators, as it threatens the traditional business model where agencies invest in training and matching caregivers with clients.

“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 stated. 

For the home care industry, where agencies invest in caregiver training and development, the ability to enforce non-solicitation agreements has been crucial. These agreements help ensure that agencies can recover their investments without the risk of clients bypassing them to hire caregivers directly.

Despite the potential negative impacts, some leaders see the ban as an opportunity to enhance workforce mobility and address long-standing issues of fair employment practices within the industry.

As the home care sector navigates this new legal landscape, further challenges and adjustments are expected. Legal experts suggest that the ultimate fate of the non-compete ban might still be decided by higher courts or even Congress, given the significant shift from state to federal jurisdiction over employment agreements.