Non-Competes: New Limits for Pennsylvania Health Care Practitioners
Pennsylvania’s new law, the Fair Contracting for Health Care Practitioners Act (the Act) went into effect on January 1, 2025. This law restricts the ability of employers and health care practitioners to enter into non-compete agreements. Governor Josh Shapiro signed the Act on July 23, 2024, aiming to ensure continuity of care between patients and their health care practitioners. The Act marks a notable change in employment practices for health care professionals in Pennsylvania, reflecting a broader movement to scrutinize restrictive covenants, especially in the health care sector. Its key goals include retaining health care talent, enhancing patient care, and promoting a competitive health care market.
The new law bans new non-compete covenants longer than a year for “Health Care Practitioners,” defined to include medical doctors, doctors of osteopathy, certified registered nurse anesthetists, certified registered nurse practitioners, and physician assistants. Certain non-competes entered into after January 1, 2025, are deemed “contrary to public policy and void and unenforceable by an employer.” However, non-compete provisions limited to one year or less are enforceable if the Health Care Practitioner terminates the employment relationship or if they are connected to the sale of a practice.
Key Provisions
Non-Compete Restrictions: Non-compete clauses that hinder Health Care Practitioners from treating or accepting patients are void and unenforceable. However, non-compete clauses lasting up to one year may still be enforced if the practitioner voluntarily resigns. These agreements become unenforceable if the employer terminates the practitioner’s employment, even if for cause.
Cost Recovery for Employers: Employers can recoup reasonable expenses, such as relocation, training, or patient acquisition costs, incurred within three years before a Health Care Practitioner voluntarily leaves.
Non-Competes in Business Sales: Non-compete agreements remain valid when tied to the sale or transfer of a business if the Health Care Practitioner is a party to the transaction.
Patient Notification: Employers must notify patients within 90 days if a practitioner with whom they have had a two-year outpatient relationship departs from the employer’s practice. The notice must explain the practitioner’s departure, how to transfer medical records, and options for continuing care with the employer or another provider.
Effective Date:Non-compete agreements executed before January 1, 2025, remain unaffected. Employers and health care practitioners should review existing agreements to prepare for the Act’s implications.
Moving Forward
Pennsylvania is among a growing number of states, including Iowa, Maryland, and Louisiana, that are restricting non-compete clauses in or health care providers’ employment agreements, joining over a dozen states have introduced similar measures. Although, the Federal Trade Commission’s proposed ban on non-compete agreements, which is currently facing legal challenges, does not apply to not-for-profit entities, such as many hospital systems. Now, Pennsylvania not-for profit health care organizations along with those in the private sector will have to consider this law when seeking to place covered Practitioners under post-employment restrictions.
Foley is here to help you address the short and long-term impacts in the wake of regulatory changes. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues. Please reach out to the authors, your Foley relationship partner, or to our Health Care Practice Group and Health Care & Life Sciences Sector with any questions.
