The term “non-compete” refers to a clause in an individual’s employment contract. It limits their ability to work for a competing business or start one of their own for a certain period of time following the end of their employment.
It’s often used in industries where employees can access sensitive information like trade secrets, but any type of organization can add this stipulation to their employment terms. It’s largely meant to protect the company, their proprietary knowledge, and their clients by preventing ex-employees from taking those assets elsewhere.
These clauses have been criticized for limiting workers’ future job prospects and freedoms. And in a landmark ruling, the United States has made them illegal. Here’s how the elimination of non-competes is poised to affect the job market at large and the future of home care.
Understanding the FTC's Non-Compete Ban
In April 2024, the FTC issued an official ban on non-compete agreements, making it illegal to add them to new employment contracts and rendering existing non-competes largely unenforceable. According to their estimates, one in five American workers – about 30 million – are currently subject to a non-compete.
According to the FTC’s official release, this ruling will go a long way toward “protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.”
They expect more than 8,500 new startups to be created per year (on top of existing market growth) as a result of the ban. They also anticipate that workers will earn higher wages due to this increased freedom, and that innovation will increase now that workers will be free to pursue whatever opportunities they please.
The only exception to this new rule excludes senior executives who are already locked into a non-compete. No new agreements of this kind may be issued regardless of the employee’s seniority level.
Main Impact on Home Care Providers
Since the elimination of non-competes applies nationwide, it will impact any home care agency that currently includes non-compete agreements in their employment contracts. Here are some changes you can expect to see now that the law is officially in effect.
Employee Mobility
Upon leaving their current employer, workers will now be able to immediately transition to a new role with another home care provider. Agencies will be able to more easily “poach” employees from one another or attract new talent by offering more attractive salaries, growth opportunities, work conditions, and benefits.
With turnover rates already presenting massive challenges for agencies, this increased competition will leave many organizations rethinking their caregiver recruitment and retention strategy.
Client Service Agreements
Without the restriction of a non-compete in place, clients may choose to bypass agencies completely and instead hire caregivers as independent contractors, reducing their out-of-pocket expenses while doing the same to the agency’s revenue.
While that may sound like a win-win for patients and caregivers, there are still risks associated with cutting agencies out. Clients may find it overwhelming to manage payments and scheduling without the support of an agency, and caregivers may lose access to benefits, professional development opportunities, and stable employment.
Workforce Development Opportunities
Removing non-compete clauses clears the way for greater market competition – and a greater need for caregiver retention efforts. This increased mobility will empower caregivers to seek out opportunities that better support their professional goals and personal needs, ultimately driving improvements across the industry. In turn, agencies may want to offer more competitive pay, better benefits, and better working conditions to attract and retain caregivers, lest they seek greener pastures.
The elimination of non-competes also addresses issues that have plagued the industry for years, such as the power imbalance between agencies and caregivers. In the past, caregivers have faced limited opportunities and may have been locked into less favorable arrangements due to restrictions put in place by these clauses. Doing away with them means establishing a fairer labor market where caregivers have greater agency over their careers.
Changes to Competition & Market Dynamics
The recent elimination of non-compete agreements in home care is expected to spur greater competition among agencies for caregivers. Without the restrictions of non-competes, caregivers will have more freedom to explore opportunities across different agencies, potentially attracting new entrants to the market. This influx of talent could drive innovation, improve service quality, and create more options for clients seeking care.
Legal Considerations
The legal challenges against the FTC’s non-compete law primarily focus on its authority to enforce such a broad regulation. Opponents argue that the rule is overreach and therefore infringes on individual states’ rights to regulate employment contracts as they see fit. Despite these challenges, the ban went into full effect on September 4, 2024 and no exceptions have been granted.
Strategies for Home Care Agencies
Against the backdrop of an increasingly competitive industry – which will only become more fierce with the elimination of non-competes – here’s what agencies can do to hold strong in the home care market.
Enhancing Employee Retention
As we discussed earlier, agencies will need to take a good look at their salary and benefits packages in light of the new competitive landscape, as well as the work environment at large.
- Offer competitive compensation to ensure caregivers feel their time is valued and prevent turnover from chasing more attractive wages.
- Provide development opportunities that encourage staff to expand their skill sets and prevent stagnation long-term.
- Create an inclusive and supportive work environment where caregivers feel free to share feedback and therefore help improve the employee experience.
- Reward excellent performance with incentive programs, bonuses, and team events that add real value while affirming employees’ efforts.
- Proactively solicit feedback from staff to solve issues before they spin out of control and jump on opportunities for retention.
Strengthening Client Relationships
Maintaining a thriving client roster is just as important as keeping employees on board. In a way, it can even work as a retention strategy; when a company is thriving, staff are more likely to want to stick around and grow alongside it.
- Create a referral program to passively acquire new and highly qualified clients, as current patients are likely to know others in need of similar care.
- Maintain an active online presence to show clients and their families that your agency is engaged with its community and on top of current technologies.
- Keep staff up-to-date with the latest training and industry best practices to ensure clients feel they are in good hands and receiving care at the highest possible level.
- Share educational content with patients – such as blogs or newsletters – to keep them feeling informed and empowered about their care.
The Future of Home Care
As mentioned above, the elimination of non-competes means increased mobility and opportunity for caregivers. That’s great for employees, but yet another staffing challenge for agencies. According to a survey commissioned by AxisCare and conducted by Leading Home Care … a Tweed Jeffries company, employee-related woes are the biggest thorn in agencies’ sides.
Caregiver shortages, recruiting, and retention are the three most significant barriers to growth identified by respondents. In terms of external forces working against their business, 64% of respondents said the rising cost of home care to consumers is poised to affect their growth as well.
Sandwiched between the forces of rising demand and limited caregiver supply, agencies will need to remain extremely nimble and strategic with their operations management.
Increase Caregiver Retention With AxisCare
As a home care software company, we work with countless agencies every day to improve their caregiver retention with user-friendly technology. Curious to know how we can help? Request a live demo and get your questions answered.
