Home Health & Hospice Week

Protect your interests without unfairly limiting competition.

Though the recent case in Missouri is a boost to the enforceability of non-compete contracts, home health agencies must draft agreements carefully.

The Missouri Supreme Court decision holds that a non-compete agreement is reasonable "if it is no more restrictive than is necessary to protect the legitimate interests of the employer."

The problem is that many employers do not have a properly drafted agreement, cautions attorney Robert Markette with Gilliland Markette & Milligan in Indianapolis.

Consider these tips to ensure that your contracts with employees make the grade:

• Restrict the reach of the contract by time and geography. Non-compete terms of six months to two years are generally acceptable in most jurisdictions.

"You can't keep an employee restricted forever," Markette advises. Nor can you keep an employee from working anywhere.

Guideline: Limit your non-competes to a specific geographic area, typically your service area, says Rick Temple, the attorney who represented Oxford Healthcare in the case just decided by the Missouri Supreme Court.

• Don't write a contract that aims to protect you from mere competition by a former employee. Rather, construct an agreement that protects your trade secrets and customer contacts.

Key clause: Include a clause in the agreement that limits a former employee's ability to contact or work with the clients he assisted when employed by your agency, suggests Markette. "That's something that a court is likely to enforce," he adds.

Define 'Trade Secret' To Succeed

You should also consider this question carefully before asking employees to sign on the dotted line: What's a trade secret? The Missouri court calls for considering these six criteria:

1. The extent to which the information is known outside of its business;
2.  The extent to which employees and others involved in its business know the information;
3.  The extent of measures it takes to guard the secrecy of the information;
4. The value of the information to the employer and its competitors;
5. The amount of effort or money the employer expends in developing the information; and
6.  The ease or difficulty with which others can acquire and copy information.

Burden of proof: It's up to you to substantiate that the information constitutes trade secret status, says the court.

Added protection: One interesting twist to the Oxford case involved the agency's not-for-profit status. The court held that "the simple fact that a corporation is organized for benevolent purposes does not indicate it does not have protectable business interests."