PA Enacts Law Restricting Enforcement of Non-Competes Against Healthcare Practitioners
Following the national trend towards prohibiting or limiting non-compete agreements, Pennsylvania has enacted the “Fair Contracting for Health Care Practitioners Act” (House Bill 1633), which restricts the ability of employers and healthcare practitioners to enter into non-compete agreements. The Act goes into effect on Jan. 1, 2025.
As a former practicing healthcare attorney, I always believed that the public interest was not well served when hospitals were allowed to use non-competes to limit a patient’s ability to follow the doctor of their choosing. This new law renders unenforceable any non-compete that “has the effect of impeding” certain healthcare practitioners’ ability to treat or accept new patients. Healthcare practitioners covered by the law include physicians (MDs and DOs), certified registered nurse anesthetists, certified registered nurse practitioners, and physician assistants.
Many hospital systems are non-profit entities. Therefore even if the Federal Trade Commission’s (FTC’s) rule banning non-competes survives legal challenges and becomes effective, the FTC does not have regulatory authority over non-profits. Pennsylvania’s Act would cover this potential gap in the FTC’s authority and protect healthcare practitioners employed by non-profit health systems.
Any non-compete entered into before the Act’s effective date of January 1, 2025 would not be subject to its provisions.
Key provisions of the new law include the following:
- Non-compete covenants that do not exceed one year in length remain enforceable when the healthcare practitioner voluntarily terminates employment.
- Non-competes are unenforceable if an employer involuntarily dismisses a practitioner for any reason – even if the non-compete duration is for one year or less. There is no apparent exception for terminations for cause.
- Non-competes tied to the sale of a business can still be enforced if the practitioner is a party to the sale and benefits financially from it.
- Employers are required to notify patients of a departing healthcare practitioner within 90 days if the practitioner has had an ongoing outpatient relationship with the patient for at least two years. The notice must provide that: (1) the practitioner has departed, (2) explain how the patient may transfer the patient’s health records, and (3) explain that the patient may be assigned to a new practitioner within the existing practice/employer if the patient so chooses.