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.