This transcript has been auto generated
00;00;05;01 - 00;00;28;21
Meg Pekarske
Hello and welcome to Hospice Insights: The Law and Beyond where we connect you to what matters in the ever changing world of hospice and palliative care. Get Up to Speed Fast: What You Need to Know About the New rules Involving Non-competes and Exempt Employees. Tom, it's been a while, but you're this is like third, fourth time on the podcast.
00;00;28;22 - 00;00;31;10
Tom O'Day
It is. I'm honored. Absolutely. Enjoy it.
00;00;31;26 - 00;01;03;29
Meg Pekarske
Well, I feel like the labor and employment area is like just busy, busy these days, like where things that are making like headlines in like The New York Times. Right. Other things. And so that start with that juicy one, which is about this rule that was released about non-compete or essentially you can't have non-compete. Can you break that down about the who, what, why, where?
00;01;04;24 - 00;01;31;21
Tom O'Day
Yeah. So traditionally non-compete agreements are thought of in a very general term. And it's important to remember there are different kinds of restrictive covenants we call them, or non-compete restrictions. Some of them are more invasive of employees and their ability to move from one employer to another. Some of them are not so invasive and hour in balance, very protective for employer interests.
00;01;32;00 - 00;01;53;24
Tom O'Day
So I all start with just kind of a background of the types of restrictive covenants. The first one is a protection for trade secrets, and that may not be applicable so much to hospices, but that's one type of protection that all companies have. In addition to the patient health information and HIPA obligations and other confidentiality requirements specific to health care.
00;01;54;05 - 00;02;13;11
Tom O'Day
You can have a confidential information restriction that applies to all of your employees as well, and that can be done by contract. Oftentimes is done by a contract that might be in an employee handbook, but probably better to do it in a separate standalone document.
00;02;13;17 - 00;02;22;12
Meg Pekarske
Tom What does that mean? Like you can't cont like non soliciting patient thing. You can't contact my other employees if you leave or what? What does that mean, what you just said.
00;02;22;25 - 00;02;47;17
Tom O'Day
So this type, this confidentiality agreement would be things like you can't share information about our hospices. I mean, I suppose it could be patient list or client list, but it wouldn't be it wouldn't be patient health information. But I guess names might might, you know, be all that would be required. But but it would be things like protecting confidential information about the business strategy.
00;02;47;17 - 00;03;22;15
Tom O'Day
So if the business intends to expand into another geographic area, or if they intend to work with another partner in providing hospice services, that might be non-trade secret, confidential information that I understand that a company may want to protect with its employees. So another kind of restriction is that employee non solicitation restriction, the idea that you can restrict an employee from soliciting their former colleagues after they leave employment to go work with them somewhere else.
00;03;22;26 - 00;03;54;08
Tom O'Day
In competition with your organization and your service. So that's an employee non solicitation restriction. There's a patient or a vendor or a supplier, non solicitation restriction that you can have in place. And that would say that after the end of employment, the employee cannot solicit patients or families or partner or service providers to leave your hospice service and go to another hospice service.
00;03;54;28 - 00;04;23;26
Tom O'Day
And the final type of restrictive covenant and the type of non-compete restriction is a geographic non-compete restriction. Something to the effect of you can't work for another hospice within ten miles of the facility located at some address. So all of those different protections are important to keep in mind for your employees and you want to take advantage of those protections where it makes sense.
00;04;24;09 - 00;04;55;20
Tom O'Day
And again, I think you should have a confidential kitty restriction with all of your employees. I think you should have an employee non solicitation restriction with all your employees because it's important and you spend time and energy and training employees to bring them up to speed on your service that you're providing. And it's important for you to protect that investment that you're making a new employees by making sure that you can't have former employees just picking them off and raiding them whenever they can.
00;04;55;20 - 00;05;32;06
Tom O'Day
And then I think for client facing for, you know, employees of the hospice like marketers that are working with partners of yours, you may want to have a vendor supplier patient restriction that applies to those marketers or some other level of employee like an executive as well. And that's reasonable, that's fair, that's in balance in exchange for the employment that you're offering to someone having them return the favor with a promise not to solicit people to compete against you is, I think, fair in a lot of circumstances.
00;05;32;29 - 00;05;42;09
Meg Pekarske
So what did the administration do with this new rule? Because the headlines like you can't have non competes anymore. So what? What are they saying?
00;05;42;29 - 00;06;18;10
Tom O'Day
So the new Federal Trade Commission rule that has been finalized and we've we've known it was coming for some time it finally came and is now planning to take effect. That rule only prohibits geographic non-compete restrictions, so it only prohibits those types of agreements that say you can't work for any hospice service within a ten mile radius of our facility or a ten mile radius of this location, you know, whatever it is or in the state or county in which the hospice service is located.
00;06;19;07 - 00;06;56;22
Tom O'Day
And the FTC did not prohibit the use of confidential information an employee non so station restrictions more patient vendor supplier partner non solicitation restrictions. And that's an important distinction because those other types of protections, the confidentiality agreements, the employee non solicitations, the patient vendor supplier, partner restrictions, those are all something that we can continue to use in the industry and we should continue to use in the industry where they're fair with the employee and the employees getting something in exchange.
00;06;57;23 - 00;07;24;29
Tom O'Day
One important thing to keep in mind about this proposed rule from the Federal Trade Commission is that it does not apply to nonprofit organizations. So for health care, that matters, obviously, for the hospice industry, that matters. If you're a nonprofit organization, then you don't need to worry about application of this rule because the Federal Trade Commission does not have authority over nonprofit organizations.
00;07;25;02 - 00;07;55;23
Tom O'Day
The FTC did say, however, that they are going to be watchful for the need for organizations to be truly nonprofit. So they use the example of a physician group of individual physicians who forms a corporate entity that might be listed as non-stock or nonprofit, but really which is used to share compensation at the end of the process with those individual physicians.
00;07;55;23 - 00;08;14;09
Tom O'Day
And the FTC pointed that out as an example of something that although it might be labeled as nonprofit, that might still be subject to the rule. So if you're a private industry, private owned organization, then the FTC would apply. But if you're a nonprofit organization, the FTC rule would not apply to you.
00;08;14;29 - 00;08;50;14
Meg Pekarske
So probably, again, people want to sell newspapers or get clicks. So like I think the headline, it's maybe overstated at least a little bit in terms of scope because as you just laid out, there's lots of different things that you can continue to do. But the geographic thing to even before this rule, I mean, at a state law level, like a lot of states, had their own limitations on non-compete and stuff.
00;08;50;14 - 00;09;19;15
Meg Pekarske
So geographic they I felt like was always somewhat in flux, depending on where you are or whatever, given that you might not have employment agreements with a lot of the employees of your organization. You talked about using a handbook for that. You're saying that your nurses, your other people, as opposed to like your executive director, is probably going to have an employment agreement.
00;09;19;15 - 00;09;23;05
Meg Pekarske
Where do you put this stuff down?
00;09;25;03 - 00;09;53;23
Tom O'Day
It can be done in separate standalone agreements. They don't need to be over legalized. They can be in plain language and they don't need to be intimidating for employees. And I think at the with a new employee during the orientation process, of course, they're signing things like independent policies that you might have in place. They might be signing an acknowledgment form that says they received the employee handbook that the organization has in place.
00;09;54;09 - 00;10;14;21
Tom O'Day
Are of course, going through benefits, paperwork and other kinds of new hire paperwork, a one or two page confidentiality restriction or employee non sole citation restriction or a patient vendor supplier partner non solicitation restriction can be part of that process. When you're onboarding every new employee in the organization.
00;10;15;11 - 00;10;38;09
Meg Pekarske
Got it. So the fact you don't have an employment agreement, there's another way you can do that just but you make it part of your process. Is there is there any benefit to it? I mean, I'm just thinking, if you refer to the employee handbook, it seems like it would be easier if that's updated to then be like, well, you accepted the new terms or something.
00;10;38;09 - 00;10;50;26
Meg Pekarske
Is there like a benefit? I mean, I don't know how much step this changes, how often that you would really want to update it. But is there some benefit that then you can integrate any updates through the employee handbook or.
00;10;51;05 - 00;11;15;18
Tom O'Day
Generally you never want an employee handbook to be considered a contract, and most employee handbooks at the front of them will say this is expressly not a contract, it's not a promise or an employment agreement for future employment. You're an at will employee generally is language that's included in all those employee handbooks, and you don't want it to have contractually binding restrictions.
00;11;15;27 - 00;11;26;15
Tom O'Day
So for that reason, it is better to use separate standalone agreements for the confidentiality of the employee restriction on the vendor patient partner non solicitation restrictions.
00;11;26;21 - 00;11;59;23
Meg Pekarske
Got it. So I'm sure you do those all the time. Time. So for people listening who don't have those, it sounds pretty important to have that because, you know, we've been involved in situations where course the bad story happens and then, you know, it's not like you can try to dispute things, but better to have something well drafted on the front end that they signed then us as lawyers trying to piece together other things.
00;12;00;05 - 00;12;24;10
Tom O'Day
Right. Yeah. I'm proud of the template or the form that that I usually start with for these types of restrictions. And again, I do think it's in plain language, it's fair to the employers. It's not overbearing in both kind of substance nor necessarily form just looking at it. And I'll think that it shouldn't scare employees off. You mentioned earlier the the the need to keep state law in mind.
00;12;24;27 - 00;13;04;11
Tom O'Day
And historically non-compete agreements and contracts have always been the purview of state legislatures and state courts. This intervention by the FTC in the federal level is is new. It's it started happening in the current administration with the National Labor Relations Board has entered the fray and said that non-compete agreements might be violated of federal labor law. President Biden issued executive order early in his administration asking for input on non-compete agreements and wanted to generally take more of a regulatory role from the federal government side.
00;13;04;20 - 00;13;28;23
Tom O'Day
But state law still does matter, and state law changes. So to the extent that there are organizations that have had a non-compete restriction at any level confidential information, employee restriction or geographic restriction, it's important to keep those updated and make sure that they still comply with the most recent state law and any changes that have occurred in that particular state.
00;13;29;01 - 00;13;53;09
Meg Pekarske
And that's what's great about being at Haskins. And you and I came to hash at the same time, but we have labor and employment colleagues in so many different states that are staying on top of all of this. But we can always tap when needed, when we're we're helping our hospice clients and we have hospice clients, I think, in every state and so right.
00;13;53;26 - 00;14;27;00
Meg Pekarske
All over the place. But the last thing I want to touch on, even though it's, I think, been somewhat less in the headlines maybe before we leave the non-compete is just this is getting contested in court. So right. This whole non-compete, which is again limited to geographic limitations, is being challenged in court. And I think when you and I were prepping, you were saying a decision coming down from one judge was at July 3rd or something.
00;14;27;00 - 00;14;53;22
Tom O'Day
Right. The intervention of the federal government in this way and the the Federal Trade Commission specifically is probably on precedent. And a lot of observers do see it as overstepping the bounds of their legislative authority. So there are court cases pending. They're pending in district courts in the state of Texas, which is typically the jurisdiction or the haven for people challenging federal rules that they don't like.
00;14;53;23 - 00;14;57;01
Meg Pekarske
Oh, really? Yeah, I didn't know that.
00;14;57;06 - 00;15;22;23
Tom O'Day
At a great place or an awful place, depending on and what you think. But the court in this district court that has these cases in front of it has said that it will make a decision before our on or around July 3rd. And that's helpful because the rule as currently in effect, the rule is set to take place on September 4th.
00;15;23;10 - 00;15;47;13
Tom O'Day
But if the court enjoins it on July 3rd or so, that happens. And then the the rule doesn't go into effect until it is dealt with in the court system. But if the court does allow the rule to continue to move forward, there's still a fair amount of time between that July 3rd timeframe and September 4th for employers to deal with it.
00;15;47;17 - 00;16;15;25
Tom O'Day
And really manage whether or not you have to adjust compensation or adjust terms and conditions of employment or whatever it might be as a result of the rule potentially going into effect in early September. So there'll be enough time. And what I'm advising clients to do is stand by the rule until early July, and by then we'll have a good decision, a good a good direction of whether or not we need to take steps to prepare for it or not.
00;16;16;12 - 00;16;49;18
Meg Pekarske
And so if the Texas court says no, this rule, you know, is that legal or it's enjoined? So there's an injunction that that would apply to essentially the entire United States, similar to other during COVID, there were likewise different injunctions that happened that stalled like federal rules and things. So that so whatever the Texas judge decides, we'll have impact to other states, is what you're saying.
00;16;50;00 - 00;16;51;28
Tom O'Day
Correct? Most likely, almost certainly.
00;16;52;09 - 00;17;19;21
Meg Pekarske
Yeah. Well, never a dull moment in your world. So I know this was last headline worthy, but since we're doing sort of labor and employment update, this whole thing about who can be considered exempt employees versus nonexempt employees, this has been covered, you know, highlighted by, you know, the Home Care Association. And I also think it could impact hospices.
00;17;19;21 - 00;17;32;02
Meg Pekarske
So what is this whole new rule about? Because it essentially says you got to pay people over time that you might have not had to before. You said that they were exempt.
00;17;32;08 - 00;18;08;10
Tom O'Day
Right. So generally, there are two things that need to happen in order for an employee to be properly exempt from being paid over time. One is that they have to perform specific duties in their job and that can take a wide variety of different things. But for the most part, it's you either supervise two or more full time equivalent people and then you can satisfy that duties test or you exercise discretion and independent judgment and your job such that your exempt from overtime requirements those are generally.
00;18;08;10 - 00;18;09;06
Meg Pekarske
So it's one or the.
00;18;09;06 - 00;18;09;23
Tom O'Day
It's or.
00;18;09;23 - 00;18;12;13
Meg Pekarske
Correct. Okay. So it's either it's both. Okay. Yep.
00;18;12;27 - 00;18;52;03
Tom O'Day
Then in addition to that duties test, the second thing that you need to meet in order to consider an employee exempt is a salary threshold. For many years, if you have made more than $35,000, 535,568, to be exact, then you could be considered exempt from overtime if you met those duties tests as well. What the new rule from the Department of Labor says is that as of July 1st, 2024, that salary threshold will increase from $35568 to $43888.
00;18;52;17 - 00;19;32;11
Tom O'Day
And then on July I'm sorry, on January 1st, 2025, that level, that salary threshold will again increase to $58,656 per year. What that means is and there's there's more to the rule. But but that's the biggest short term, relatively short term impact of it. So if you have employees that you have considered exempt traditionally in your organization who are making between $35,568 and $43,888, you now need to consider how to address them in the next six months or so.
00;19;32;20 - 00;20;01;10
Tom O'Day
Well, I'm sorry for that for that, you have to decide how you're going to address them before July 1st. And then at some point you'll have to address whether or not you increase their salaries above $58,656. So really, I think the first step for employers is to figure out how many employees that they consider exempt at this time are are making less than those new salary thresholds as of July 1st and January 1st.
00;20;01;22 - 00;20;21;23
Meg Pekarske
Yeah. So and again, when we were prepping nursing, the administration says this could impact what was it you said, four or 5 million individuals they anticipate like would essentially now get over time that they were essentially not getting paid for.
00;20;22;05 - 00;20;26;02
Tom O'Day
Correct. That would be the economic impact of the of the rule change.
00;20;26;07 - 00;20;26;22
Meg Pekarske
Yeah.
00;20;26;22 - 00;20;51;03
Tom O'Day
And employers have the choice. They can decide we're not going to increase salaries and we will pay overtime going forward. Of course, that means their practices would need to change. You would need to track over time one thing that that an often kind of misnomer about this, a belief that's not accurate, is that you have to then change someone from a salary to hourly pay.
00;20;51;20 - 00;21;25;00
Tom O'Day
And that's not the case. You can still have salaried employees who are getting overtime compensation. The calculation needs to be, you know, made. But that oftentimes is something that's missed by human resources. And it's important because I've been shocked over the years this this issue of of exemptions from overtime has come up at the federal level. And and when you do need to make changes with employees, a lot of employees see it as a demotion just to be called an hourly employee.
00;21;25;12 - 00;21;50;06
Tom O'Day
Oh, so for employment relations purposes, it has nothing to do with the law. But keeping someone at a salary but still considering them to be eligible for overtime is probably a better human resources action than saying, sorry, we're not going to move you up to $43,000 per year. But now we're also going to make you an hourly employee.
00;21;50;06 - 00;21;56;05
Tom O'Day
And congratulations, you now make $30 per hour instead of, you know, $40,000 a year.
00;21;56;26 - 00;21;59;05
Meg Pekarske
Yeah. See, this is why I call you challenge.
00;21;59;27 - 00;22;00;03
Tom O'Day
The.
00;22;00;03 - 00;22;22;05
Meg Pekarske
Practical part. Yeah, well, you know, it's always so funny. People think like, oh, you're a lawyer, you know? And then they get into, like, some trust in the stage staff and my eyes glaze over or all this other stuff that was, you know, getting around 30 years ago, I started bus schools, right? Yeah. I don't remember any of this.
00;22;22;05 - 00;22;46;05
Meg Pekarske
This is why I work at a firm with people who are very skilled with these things, like you said, because as you're explaining that I sort of think the same thing about like, oh, if you're hourly, that's who gets overtime and salaried people don't get, you know, so right. So I guess I'm not the only person in the world that thinks incorrectly about that.
00;22;46;23 - 00;23;11;25
Tom O'Day
Right. The other thing to keep in mind, similar to the FTC non-compete rule is there are still state laws that govern when you have to pay someone overtime compensation. So the state laws will will still be in play. And some of them are more generous to employees for how much overtime compensation has to be paid to them and others are either the same as federal law, or maybe even worse.
00;23;11;25 - 00;23;18;11
Tom O'Day
But the employee gets the better of the two. So federal law demands that they're paid overtime. You've got to pay that. Even if the state does not.
00;23;18;15 - 00;23;53;00
Meg Pekarske
Well, and I guess just a final comment. As you're talking about federal and state, I remember talking to some clients who service like Chicago area, but they're, you know, not in Chicago land necessarily their headquarters, but like they go in to Chicago proper and how like, you know, the city has different minimum wages than the county versus the state versus and it was like, oh, my gosh, how do you keep track of this?
00;23;53;00 - 00;24;09;00
Meg Pekarske
And then it's like, does it matter? Like, so this one employee goes to Chicago for one visit, but then they're going somewhere to some other city, like, how do you keep track? Like, I was just I all these things. I don't think about town. Yeah, it's like. That's complicated.
00;24;09;14 - 00;24;31;19
Tom O'Day
It is. It is, but always changing as well, which is nice. And it's it's not just the agencies taking steps to change the law, but it's also the courts stepping in as well. And again, similar to the FTC rule, this Department of Labor exempt overtime exempt rule has been challenged in courts similarly in the state of Texas. And it's it's the same.
00;24;31;26 - 00;25;02;06
Tom O'Day
I know. I know it's shocking. It's the same same area. And courts that have invalidated these kinds of overtime exemption rules in the past. It happened in 2016. It's being challenged from a Trump administration rule in 2019. So it's it's common. It's going to happen. And in this case as well, we should know in the next couple weeks whether or not a court is going to stop this from taking effect before July 1st as well.
00;25;02;06 - 00;25;08;23
Tom O'Day
So a lot of court activity will be coming ahead of the holiday and it could be significant here.
00;25;08;23 - 00;25;18;07
Meg Pekarske
Just we hunkered down over the 4th of July, just like eagerly awaiting who needs a vacation when I can read court cases.
00;25;18;21 - 00;25;40;22
Tom O'Day
Or I can anticipate what's going to happen and have those alerts drafted already, because I do think and I do believe that both the FTC rule and the wage overtime exemption rule will be put on hold by courts. I don't think either one of those will survive our July 4th holiday.
00;25;41;01 - 00;25;54;04
Meg Pekarske
So I just want to, knowing nothing about this other than you taught me today, and I want to be contrarian, I should take the opposite view and bet you what, a cocktail or something?
00;25;54;16 - 00;26;09;14
Tom O'Day
I just sent an email out to our whole office about the 50 or so brats bratwurst that I got because I presented at a conference yesterday. I opened this bag and was just shocked at how many brats were in there. So I can't I can't eat all of those.
00;26;09;23 - 00;26;10;17
Meg Pekarske
How can I keep.
00;26;10;22 - 00;26;11;04
Tom O'Day
Some of my.
00;26;11;04 - 00;26;25;13
Meg Pekarske
Brats? So do we. Everyone knows that I'm in Madison, Wisconsin, but Tom actually works in the Madison office with me. So do people eat brats outside of Wisconsin? I don't. I do, right? I don't know. It seems Wisconsin.
00;26;25;13 - 00;26;26;26
Tom O'Day
You'd be missing out if you're not.
00;26;27;11 - 00;26;45;25
Meg Pekarske
And I learned from my dad that there's bratwurst patties. I didn't know that I'm a vegetarian, so, like, I didn't know that we've moved from the sausage farm to a patty farm of the proper. So but so any listeners, if you want a free broad email time of day, stop.
00;26;45;25 - 00;26;46;22
Tom O'Day
By our office. Sure.
00;26;46;22 - 00;27;05;03
Meg Pekarske
Yeah, exactly. It is a beautiful time to be in Wisconsin anyway. Wow, this is wonderful. Thank you for teaching me all this important stuff. Time that I don't know. I don't want to know. I just want to be able to call you and tell me, Hey, Tom, what should we do here? So thank you for always being that guy.
00;27;05;07 - 00;27;37;15
Tom O'Day
Sure. Yeah, it's great opportunity. The new the new changes, the attention from the the federal government is going to generate a lot of press. And you started off, Mike, by pointing out this is hitting general media, The New York Times, the local newspapers. And it's an opportunity for human resources to review of the overall way that they use non solicitation restrictions and the confidentiality and trade secret restrictions and also an opportunity to evaluate those individuals that you do consider exempt from over time because there's going to be a lot of attention around it in the next couple of weeks.
00;27;37;15 - 00;27;40;06
Tom O'Day
And I can get ahead of that as well if they can.
00;27;40;15 - 00;27;52;25
Meg Pekarske
All right. So we want to do a podcast with each and every new decision that comes out. But it sounds like there's there's interesting times ahead. So until next time. Tom, thank you.
00;27;52;26 - 00;27;55;28
Tom O'Day
Thanks for the invite.
00;27;56;04 - 00;28;13;20
Meg Pekarske
Well, that's it for today's episode of Hospice Insights: The Law and Beyond. Thank you for joining the conversation. To subscribe to our podcast, visit our website at huschblackwell.com or sign up wherever you get your podcasts. Until next time, may the wind be at your back.