What happened?

On July 17, 2024, Pennsylvania Governor Josh Shapiro signed the Fair Contracting for Health Care Practitioners Act (the “Act”), banning certain noncompete covenants over 1 year or if the practitioner was dismissed. 

What are the details?

Key Bites for employers:

• Void and Unenforceable Covenants (with exceptions): The Act invalidates any covenant that impedes a health care practitioner’s ability to treat or accept new patients, with an exception for covenants lasting no more than 1 year if the practitioner was not dismissed by the employer (termination cause). Some exceptions apply to certain conditions.

• Definitions the Act defines employers, Healthcare Practitioners, and noncompete covenants.
  • The term employer is so broad that it is not clear if it is limited to employer-employee relationships.
    
• Expense Recovery: Employers can enforce contract provisions to recover reasonable expenses from practitioners if certain conditions are met.

• Exclusions: The Act does not apply to covenants related to:
  
  (1) Sale of a practitioner’s ownership interest in an entity.
  (2) Transactions involving the sale, transfer, or change in control of the business entity.
  (3) Ownership interest in the business entity.
  
  
• Patient Notification Requirements: Employers must notify patients within 90 days of a practitioner’s departure with certain minimum requirements.

For a good breakdown:
Health Care Practitioner Noncompete Ban Signed Into Pennsylvania Law
Pennsylvania Enacts Fair Contracting

Business Considerations

• Employers should update their policies, practices, procedures, and notices to comply with the new requirements.
• Employers should review and update non-compete agreements to ensure compliance with the Act, ensuring covenants:
  
  (1) Do not exceed 1 year.
  (2) Are only applied when a practitioner voluntarily terminates employment.
  
  
• Employers should establish a process for recovering reasonable expenses related to relocation, training, and establishing a patient base, ensuring these expenses are accrued within three years before voluntary separation.
• Employers should develop a patient notification process to inform patients within 90 days of a practitioner’s departure, including details on how to transfer health records and options for continued care.

Source References

• IL HB 1633 (Act 74 – Fair Contracting for Health Care Practitioners Act)
• Pennsylvania Enacts Law Banning Certain Non-Compete Agreements with Healthcare Providers (Littler Mendelson P.C.)
• Pennsylvania Bans Most Non-Compete Agreements for Healthcare Practitioners (Jackson Lewis P.C.)
• Breaking News – Pennsylvania’s New Non-Compete Law in Healthcare (Lamb McErlane PC)

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.