Home Health & Hospice Week

Heed the latest court decision that shoots down one HHA's non-compete agreements.

Your non-competes with employees could be worth less than the paper they're printed on if you don't learn some lessons from a recent state court decision.

Oxford Healthcare took its former Joplin, MO office nursing supervisor Luann Helms and regional director Pearl Walker Copeland to court in 2000 to enforce non-compete agreements with the employees, according to a July 27 decision issued by the Missouri Court of Appeals, Southern District.

Case details: Helms and Copeland had re-signed from Oxford in January 2000 and went to work for a competitor, Integrity Home Care, according to the decision in Healthcare Services of the Ozarks Inc., d/b/a Oxford Healthcare v. Pearl Walker Copeland and Luann Helms (Nos. 26410 & 26452).

With the employees' help, Integrity successfully launched a competing program for Medicaid patients in Oxford's service area and secured a state grant for the business.

Copeland also held meetings in her home to solicit Oxford employees for Integrity, the suit says. When some of the employees jumped ship, their Oxford patients asked to be reassigned to Integrity as well.

After Oxford filed suit in February and March of 2000, the trial court granted temporary restraining orders enforcing the non-competes until their terms expired in February 2002, the decision says. Copeland and Helms counter-sued for tortuous interference and Oxford sought damages for the period in which the employees breached their non-competes.

When the trial finally took place in January 2004, the trial court upheld the non-competes, but denied Oxford's claim for damages and the employees' counterclaims.

Appeals Court Reverses Ruling

But the appeals court ruled July 27 that the non-competes weren't enforceable because Oxford didn't have "protectible interests" at stake. In other words, a non-compete can't just protect an employer against competition but must protect trade secrets and customer contacts.

The court seemed to reason that Oxford's patient list wasn't a protectible interest because it consisted of Medicaid patients. "There is no evidence that [Copeland and Helms] acquired the type of influence over Oxford's Medicaid clients that would justify enforcement of a non-compete agreement that would preclude them from working for a competitor of Oxford," the appeals court said. "Likewise, the record does not support Oxford's claim that Copeland or Helms possessed protectible trade secrets of Oxford."

Because it found the non-competes unenforceable, the court sent the employees' counterclaims back to the trial court level for a new trial.

It's not over: Now Oxford is pursuing further legal action on the suit by requesting a transfer to the state's highest court, the Missouri Supreme Court, says Rick Temple, Oxford's attorney. The soonest the case could get Supreme Court action is six months, Temple tells Eli.

Oxford argues in the transfer request that the client list is a protectible interest. "The fact that such individuals qualified for and had their services paid for by Medicaid should not disqualify Oxford from protecting those client bases," says the request filed Aug. 11.

And the HHA argues that Copeland and Helms did use trade secrets in their new jobs. Oxford's policies and procedures and its employees' salary levels and patient assignments are examples.

Oxford has succeeded where many competitors have failed "because we know how to do things that they do not know how to do," Oxford founder Charles Goforth said in the transfer application. "We know how to market and they don't know how to do it. We have a way to recruit and retain our people that they do not have. We have a way to supervise them in the home they do not have."

What's at stake: Oxford is pursuing the case because it wants to make sure its non-competes with other employees are enforceable, says Temple, based in Springfield, MO. And the HHA hopes to recover damages with a favorable decision.

Copeland and Helms have also filed post-trial motions, Temple reports.

Many Non-Competes Overly Broad

Oxford isn't the only one that thinks the appeals court is in the wrong. "I think the court was mistaken," says attorney Robert Markette with Gilliland & Caudill in Indianapolis. The opinion seems to contradict other case law in Missouri.

But non-competes are a notoriously difficult agreement to get right. Often they are overly broad, notes St. Louis, MO-based employment law attorney Tim Willoughby. That means courts won't enforce them, or at least employers run up big legal bills to enforce them.

Convincing a court to enforce a non-compete that keeps employees from working for competitors can be hard, Markette warns. Instead, focus on keeping employees from soliciting patients and other employees when they decide to go, he advises.