The Florida Supreme Court has recently determined that home health marketers can’t poach referral sources from their former employers if they previously signed non-compete agreements.
The decision is a likely game changer for home care marketers and their employers nationwide, regardless of whether they work for Medicare skilled agencies or private duty companies.
The Sept. 14 decision makes it clear that referral sources of home health agencies can be protected through use of appropriate non-compete, non-solicitation and confidentiality agreements.
Home health marketers often utilize referral sources from former employers, believing they’re not violating a non-compete agreement. But under the new ruling, marketers who do so could be responsible for paying their former employer all of the revenue lost because the marketers solicited those referral sources.
Although this decision applies to home health providers in Florida, it likely will be followed by other jurisdictions. That’s because it is a decision of the Supreme Court in that state.
The case of Elizabeth White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC et al; Americare Home Therapy, Inc. v. Carla Hiles involved skilled home health agencies. But the same reasoning is likely to be applied to other types of home care providers including hospices, home medical equipment (HME) companies and private duty agencies.
Background on the decision
The decision stems from two circumstances involving employees working to market and solicit referrals for home health providers.
In each instance, the employee signed a non-compete agreement that prevented her from working in a certain area for one year after working for her respective employer.
Both employees went on to work for competing providers in overlapping territory.
One former employer saw a decline in referrals of new clients from sources assigned to that employee. In the other instance, the former employer received no referrals from the same sources that generated about $712,000 in gross revenue for the agency the previous year.
The Florida Supreme Court sent the case back to a lower court to determine the action to be taken against the marketers. That action had not been decided as of early November.
Develop agreements for marketers.
- Agencies should create and use non-compete, non-solicitation and confidentiality agreements in order to protect referral sources when marketers leave.
- Agreements should include reasonable restrictions depending upon state law on the subject.
- Agencies also may include non-solicitation clauses regarding employees, patients and referral sources. A standard agreement can be used, but agencies may also make changes to provisions in the agreement for specific employees.
Make agreements a condition of employment.
- Require marketers to sign non-compete, non-solicitation and confidentiality agreements when they are hired.
- Current marketers also should be required to sign such agreements as a condition of continued employment.
- Remind marketers of these agreements when they leave the agency
Know your state requirements.
- Make sure non-compete, non-solicitation and confidentiality agreements comply with applicable state requirements.
- Laws in this area currently vary by state.
Educate marketers on this court decision.
- Informing employees about this case can help them better understand their limitations when they leave your agency. Such education also can keep them in the know about the potential penalties for violating non-compete, non-solicitation and confidentiality agreements and serve as a deterrent.
Retain documentation of lost revenue.
- If a marketer goes to a competitor and starts soliciting referral sources obtained from your agency, be sure to keep clear documentation of lost revenue. This likely will be crucial in making a case and protecting agency interests.
About the author: Elizabeth Hogue, Esq. is an attorney representing health care providers around the country. She has published books and articles on health-related topics. She has offices in Washington, D.C. For more information, contact ElizabethHogue@ElizabethHogue.net.