A proposed ban on noncompete contracts and clauses by the Federal Trade Commission could become a huge headache for home care and hospice providers who use them. That is the word from attorneys from Polsinelli Law, which represents providers.
“The bottom line and the takeaway is that the FTC hates noncompete clauses and the FTC is going to try to do what it can to make sure they get rid of them,” Eric Packel, chair of Polsinelli’s restrictive covenants and trade litigation unit, said Thursday during a webinar.
The FTC announced the proposed rule banning noncompetes earlier this month and is seeking comment from the public until mid-March. The proposal not only prohibits employers from entering into noncompetes with workers currently on staff, but would also require employers to rescind agreements signed by former employees within 180 days of the law going into effect.
“For some employers, that may be a big ask if you use these frequently with your workforce,” Polsinelli attorney Emma Schuering told the audience. “You have to give notice that you are doing this to workers current and former in writing. If you don’t, you’re in violation of the rule.”
The proposed rule is expansive in its reach. It covers all employees, including full-time, part-time and contracted workers, in addition to unpaid interns and volunteers.
A noncompete agreement or clause is a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with another firm or operating a business after the worker leaves that employer.
The FTC proposal does not apply to nondisclosure agreements, which prevent employees from revealing confidential information about employers. It also does not apply to nonsolicitation agreements, which prevent workers from soliciting an employer’s clients or customers for their own benefit or that of a competitor. However, Schuering said home care firms could run into trouble if noncompete clauses are included in broader employee agreements that also contain nondisclosure and nonsolicitation clauses.
“You have to make sure those other parts of the agreement — if you want them to continue in full force and effect — are severed out from what could be an unlawful noncompete clause within an otherwise lawful agreement,” she explained.
The FTC will review public comments on the proposed rule and could make changes to the final rule based on public input.