What happened?

On March 4, 2025, Arkansas Governor Sarah Huckabee Sanders signed Senate Bill 139 into law, now known as Act 232. This act amends the state’s non-compete statute to void any non-compete covenants that restrict a physician’s right to practice within their scope of practice.

Overview:

Act 232 amends Arkansas law regarding covenants not to compete (CNCs), specifically for medical professionals. It adds a provision that automatically voids any CNC restricting physicians’ ability to practice within their professional scope.

• The term “physician” includes those licensed to practice medicine under the Arkansas Medical Practices Act and those authorized to practice osteopathy.

• The act maintains existing protections for trade secrets and clarifies that CNCs in contexts outside of employment, such as business sales or franchise agreements, are not impacted.

• This legislation aims to prevent overly restrictive employment contracts that could limit patient access to healthcare services or a physician’s professional mobility.

Amendments:

• Section 1: Amends Arkansas Code § 4-75-101(h) to specify that this section does not apply to CNCs ancillary to other contractual relationships, such as business sales, franchise agreements, and agreements not related to employment.

• Section 2: Amends Arkansas Code § 4-75-101(j) to state that this section does not impair, limit, or change protections under the Arkansas Trade Secrets Act and does not apply to individuals holding professional licenses under Arkansas Code Title 17, Subtitle 3.

• Section 3:
  • Adds a new subsection (k) to Arkansas Code § 4-75-101, declaring that CNCs restricting a physician’s right to practice within their scope are void.
  • Defines “physician” as someone authorized or licensed to practice medicine or osteopathy under the Arkansas Medical Practices Act.

Additional Information:

• Effective Date: Since Act 232 does not specify an effective date, it will become effective 91 days after the General Assembly adjourns sine die. The 2025 Regular Session of the Arkansas General Assembly is scheduled to adjourn on April 11, 2025, making the effective date July 11, 2025.

• Retroactive Application: It is unclear whether the amendment applies retroactively to agreements signed before the legislation’s effective date. Generally, Arkansas law presumes statutes operate prospectively unless stated otherwise. Employers should consult legal counsel to evaluate the potential retroactive application of the act to existing agreements.

Source References

• AR SB 139
• AR Governor Press Release

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