On July 17, 2024, Pennsylvania Governor Josh Shapiro signed the Fair Contracting for Health Care Practitioners Act into law, which will become effective as of January 1, 2025 (click here see the full bill). Any noncompete covenants that are greater than one year in length in an employment agreement for a healthcare provider, entered into after the effective date, are void and unenforceable. The exception that allows for noncompete covenants that are one year in length or less only applies to situations where the healthcare provider departs on their own volition; if a healthcare provider is terminated or dismissed by the employer, the noncompete covenant is not enforceable.
Employers are still authorized to recover reasonable expenses from a healthcare provider for expenses “related to the relocation, training, and establishment of a patient base,” but these expenses can only be recovered if the healthcare provider left on his or her own volition and was not terminated or dismissed by the employer.
Additionally, any noncompete covenants related to the sale of an ownership interest or the sale of all or substantially all of the assets of a practice are not subject to the restrictions in this Act. If a provider is not a party to the sale, however, the noncompete agreement is void and unenforceable. This exception only applies to those with ownership interests in a practice.
Per the Act, the Health Care Cost Containment Council will perform a study of the effects of this Act within three years following its effective date and will report its findings back to the State Senate’s and State House’s Health and Human Services Committees.