Quick Hits
- Noncompete agreements lasting longer than one year between employers and healthcare practitioners will be unenforceable.
- Healthcare employers will be required to notify patients when their healthcare practitioner has left the employer’s practice.
- The law takes effect on January 1, 2025, and only applies to agreements entered into after that date.
On July 17, 2024, Governor Josh Shapiro signed into law House Bill (HB) 1633, also known as the “Fair Contracting for Health Care Practitioners Act,” which will prohibit enforcement of “noncompete covenant[s]” with time periods of more than one year entered into by healthcare practitioners and employers as well as impose certain notification requirements on healthcare employers.
Pennsylvania was one of a dozen states with no laws restricting noncompete agreements, but recently, similar restrictions and bans have been passed in a growing number of U.S. jurisdictions.
Key Terms
The act broadly defines a “noncompete covenant” as an agreement between an employer and a healthcare practitioner that “has the effect of impeding the ability of the healthcare practitioner to continue treating patients or accepting new patients, either practicing independently or in the employment of a competing employer after the term of employment.” (Emphasis added).
Covered “health care practitioner[s]” include medical doctors, doctors of osteopathy, nurse anesthetists, nurse practitioners, and physician assistants.
Exceptions
The act only applies to noncompete agreements entered into after January 1, 2025.
The act includes a key exception, allowing employer enforcement of noncompete covenants “if the length of the noncompete covenant is no more than one year, provided that the health care practitioner was not dismissed by the employer.”
Nothing in the act prohibits enforcement of contract provisions that allow an employer to “recover reasonable expenses from a health care practitioner” that are “directly attributable to the health care practitioner and accrued within the three years prior to separation.” The act also does not void or render unenforceable noncompete agreements tied to the sale of a business or stake in a business.
Patient Notification
Further, the act requires that healthcare employers notify a healthcare practitioner’s patients within ninety days of the healthcare practitioner’s departure: (1) that the practitioner has departed, (2) how patients can transfer their records, and (3) that “patient[s] may be assigned to a new health care practitioner within the existing employer” if they choose.
Next Steps
Healthcare employers operating in Pennsylvania may want to take note of the new law’s restrictions on noncompete agreements and review whether any existing agreements need to be modified. They also may want to prepare to meet the new patient notification obligations beginning January 1, 2025.
Ogletree Deakins will continue to monitor developments and will provide updates on the Pennsylvania and Unfair Competition and Trade Secrets blogs.
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