New Pennsylvania law restricting noncompetes with health care practitioners is now in effect

The Fair Contracting for Health Care Practitioners Act took effect on January 1, 2025. The Act generally bans the use of noncompete agreements with certain health care practitioners but with some notable exceptions.

Who

The Act defines “health care practitioner” as a medical doctor, doctor of osteopathy, certified registered nurse anesthetist, registered nurse practitioner, or physician assistant.”

What

“Noncompete covenant” is broadly defined as “An agreement that is entered into between an employer and a health care practitioner in this Commonwealth which has the effect of impeding the ability of the health care 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.” 35 Pa. Stat. Ann. § 10323.

When

The Act took effect on January 1, 2025.

The General Rule

Any noncompete entered into with a health care practitioner after January 1, 2025 is “deemed contrary to the public policy and is void and unenforceable by an employer.” 35 Pa. Stat. Ann. § 10324(a).

The Exceptions

1.      Less than one year, not dismissed. The general prohibition does not apply to noncompetes where (1) the duration of the restrictive covenant is less than one year; and (2) the health care practitioner was not dismissed by the employer. 35 Pa. Stat. Ann. § 10324(b). 

2.      Recovery of reasonable expenses. An employer may still contract with a health care practitioner to recover reasonable expenses, if the expenses are: (1) Directly attributable to the health care practitioner and accrued within the three years prior to separation, unless separation is caused by dismissal of the health care practitioner; (2) related to relocation, training and establishment of a patient base; and (3) amortized over a period of up to five years from the date of separation by the health care practitioner. 35 Pa. Stat. Ann. § 10324(c)(1).

3.     Ownership transfers. Noncompetes remain permissible for: (1) the sale of an ownership interest or all or substantially all of the assets of the business entity; (2) a transaction resulting in the sale, transfer or other disposition of the control of the business entity, including by merger or consolidation; and (3) the health care practitioner’s receipt, by purchase, grant, award, issuance or otherwise, of an ownership interest in the business entity. 35 Pa. Stat. Ann. § 10324(c)(2).

Patient Notification

            The Act also requires employers to notify the health care practitioner’s patients of: (1) the health care practitioner’s departure; (2) if the patient chooses to receive care from the departed health care practitioner or another health care practitioner, how the patient may transfer the patient’s health records to a health care practitioner other than with the employer; and (3) that the patient may be assigned to a new health care practitioner within the existing employer if the patient chooses to continue receiving care from the employer. 35 Pa. Stat. Ann. § 10325. The notice must be sent within 90 days of the employee’s departure and only to patients the employee saw within the past year and had an ongoing outpatient relationship with for two or more years. 

DOL Proposes Phase Out of Subminimum Wages for Some Employees with Disabilities

The Department of Labor announced a proposed rule that would phase out certificates allowing payment of less than minimum wage to some workers with disabilities. Press release here. 

As summarized by the DOL in the proposed rule:

The Fair Labor Standards Act (FLSA or Act) authorizes the Secretary of Labor to issue certificates allowing employers to pay productivity-based subminimum wages to workers with disabilities, but only where such certificates are necessary to prevent the curtailment of opportunities for employment.

The actual proposal is summarized as:

Not official use. 

The Department specifically proposes to cease issuance of new section 14(c) certificates to employers submitting an initial application on or after the effective date of a final rule and permit existing section 14(c) certificate holders, assuming all legal requirements are met, to continue to operate under section 14(c) certificate authority for up to 3 years after the effective date of a final rule. The Department is also requesting comment as to whether, if this proposed rule is finalized, it would be appropriate to grant an extension for existing section 14(c) certificate holders who demonstrate a need and seeks comments on the need for such an extension period, and, if needed, its scope, structure and length. 

Given the pending change of administrations, we will have to wait and see if this actually gets finalized and goes into effect.

Court Strikes Down DOL Overtime Rule

Stop me if you've heard this one! It's just before Thanksgiving, we just had a presidential election (in which Donald Trump got elected), and a new regulation increasing the minimum salary threshold for the white collar overtime exemptions is about to go into effect, when . . . a court strikes the rule down in its entirety nationwide. Yes, that happened in 2016 to the Obama DOL overtime rule. Guess what? It just happened again to the Biden DOL overtime rule. 

Long story short: Certain white collar salaried employees are exempt from the FLSA's overtime requirements (i.e. they do not get paid time and a half for hours over 40 worked in a workweek). To qualify for the exemption the employee's must receive a salary in excess of a minimum salary threshold. It was $684 per week under a Trump administration rule. The Biden administration's rule increased the minimum to $844/week on July 1, 2024 and was scheduled to increase to $1,128/week on January 1, 2025. 

Not official use. 

The new rule would also have increased the minimum for the Highly Compensated Employee (HCE) exemptions ($132,964 on July 1, 2024, and $151,164 on January 1, 2025). The new rule included other more minor changes (future automatic increases, counting nondiscretionary bonuses, catchup payments, etc.).

On Friday, a federal court in Texas struck down the whole rule (opinion via Bloomberg Law). 

Just tell me what this means!

The entire rule has been vacated. Yes, even the part that already went into effect in July. So, we're back to $684/week as the minimum salary threshold for the white collar exemptions. 

Caveat: We may see an appeal, and we don't know how an appeals court will rule. We also don't know how the incoming Trump administration will handle those appeals (and/or whether it will propose a new rule of its own or repeal the Biden Rule). 

NLRB Rules Captive Audience Meetings Violate the NLRA

The National Labor Relations Act (NLRA) severely limits the steps employers can take to oppose union organizing activity. For years, the one weapon they had at their disposal was "captive audience meetings." Yesterday, the National Labor Relations Board (NLRB) overruled precedent from 1948(!):

Not official use.

[A]n employer violates the National Labor Relations Act by requiring employees under threat of discipline or discharge to attend meetings in which the employer expresses its views on unionization.

Press release here | Full decision in Amazon Services LLC here. Can employers still hold meetings to express their views on unionization at all? Yes, but under very narrow circumstances:

[T]he Board made clear that an employer may lawfully hold meetings with workers to express its views on unionization so long as workers are provided reasonable advance notice of: the subject of any such meeting, that attendance is voluntary with no adverse consequences for failure to attend, and that no attendance records of the meeting will be kept. 

Now, you may have heard . . . we have a new Presidential administration coming in January. I don't condone gambling on administrative agency decisions, but if I had to bet . . . we'll see a reversal at some point in the next four years (either in the courts or at the NLRB). 

Court Blocks FTC Noncompete Ban

 While this is not shocking, it is still big news - the Northern District of Texas struck down the FTC's proposed ban on noncompetes, which was to take effect on September 4, 2024. You can read the Court's Opinion and Order in Ryan LLC v. Federal Trade Commission here.

In short: "The Non-Compete Rule, 16 C.F.R. § 910.1–.6, is hereby SET ASIDE and shall not be enforced or otherwise take effect on September 4, 2024, or thereafter." The Court held that "the FTC lacks statutory authority to promulgate the NonCompete Rule, and that the Rule is arbitrary and capricious."

What now? Well, for now noncompetes remain as enforceable as they were before the FTC rule, and employers can hold off on sending those notices of unenforceability to employees with noncompetes. We will likely see an appeal from the FTC. It is possible (but in my opinion unlikely) that an appellate court will take swift action to reinstate the rule. Longer term, there will be some appellate action and other pending litigation playing out. Yes, the ol' "stay tuned." 

Video from Wage and Hour Presentation (FLSA Overtime Regulations)

On August 1, 2024, Jens Thorsen and Valhalla Business Advisors invited me to speak about recent developments in wage and hour law. It was a solid mix of fundamentals, and the new FLSA overtime regulations (with some Pennsylvania Minimum Wage Act thrown in for good measure). You can view the recording of Emerging HR Updates Seminar Overtime Rules '24. 

FTC announces final rule banning noncompetes

Yesterday, the FTC released its final rule banning noncompetes (Announcement | Final Rule). Of course, we had some idea of what to expect from the proposed rule. But, as always, there were a few teaks in the final version. The final rule is 570 pages, so I haven't digested the whole thing yet, but here are some highlights:

The Gist

Employee noncompetes are an unfair method of competition and therefore unenforceable. In other words, it bans new noncompetes *and* renders existing noncompetes unenforceable. 

Effective Date

120 days after publication in the Federal Register - probably late August-ish, 

Changes from Proposed Rule

• Existing noncompetes can still be enforced against "Senior Executives" (workers earning more than $151,164 who are in a "policy-making position"), but no new noncompetes. 
• Employers are no longer required to formally rescind existing noncompetes. Instead, they can simply provide notice to the employee that the existing noncompete will not be enforced. The rule includes a model notice. 

Notable Exceptions

• A noncompete in connection with the sale of a business (note that the Final Rule drops the 25% ownership requirement from the proposed rule).
• Causes of action that accrue prior to the effective date.   

  

  Not official use. 

  
  

Alternatives 

• Non-Disclosure Agreements (NDAs);
• Non-Solictation Agreements (client and employee); and
• Training Repayment Agreement Provisions (TRAPs). 

Note that all of these come with the caveat that they must be narrowly tailored and not so broad as to effectively serve as noncompetes.

Of course, this entire thing comes with the giant caveat that there will likely be legal challenges to the FTC's authority to implement this rule. I plan as though it's happening, but wait until the last minute to actually implement (lesson learned from the salary threshold debacle of 2016).