Understanding Pennsylvania's New Law on Non-Compete Agreements for Healthcare Workers

Pennsylvania has made a significant change to how non-compete agreements work for healthcare professionals. On July 23, 2024, Governor Josh Shapiro signed the Fair Contracting for Health Care Practitioners Act. This new law impacts non-compete agreements between healthcare practitioners and their employers, focusing on those agreements that last longer than a year or when a healthcare practitioner is dismissed by their employer. The law is set to take effect on January 1, 2025.

Key Points of the New Law

The new law makes certain non-compete agreements void and unenforceable. Specifically, it targets agreements that prevent healthcare practitioners from continuing to treat or accept new patients after leaving an employer. However, there’s an important exception: if the non-compete agreement is less than a year long and the healthcare practitioner leaves voluntarily (i.e., is not dismissed), it can still be enforced.

Here’s a breakdown of what this means:

- Who is Affected? The law applies to a wide range of healthcare workers, including medical doctors, osteopaths, certified registered nurse anesthetists, nurse practitioners, and physician assistants. Essentially, if you’re a healthcare provider working at a healthcare facility or office, this law could apply to you.

- What's Covered? The law uses the term “non-compete covenants,” but it broadly includes what we usually think of as patient non-solicitation agreements. If an agreement makes it difficult for a healthcare worker to treat patients or accept new ones, it’s likely covered under this law.

- Exceptions and Limitations:  Non-compete agreements that last no more than a year and apply to voluntarily separated employees remain valid. Additionally, the law doesn’t restrict employers from reclaiming reasonable expenses for things like relocation, training, and setting up a patient base, as long as these expenses accrued in the three years before the healthcare worker left and were amortized over a period of up to five years after their departure.

Additional Provisions

There are a couple more points worth noting:

1. Sale of Business Interests: The law doesn’t affect non-compete agreements related to the sale of a healthcare practitioner's ownership stake in a business or the sale, transfer, or change of control of the business.

2. Patient Notification Requirements: If a healthcare practitioner had an ongoing relationship with a patient for two or more years and saw the patient within a year before leaving, the employer must notify the patient within 90 days of the practitioner's departure. The notice must inform the patient about the practitioner's departure, offer the option to continue care with them, and provide information on how to transfer records if needed.

 What Employers Should Do Next

If you’re an entity employing healthcare practitioners in Pennsylvania, it’s crucial to consult with our team to review your existing contracts. You should evaluate any post-employment restrictions and establish a plan for the patient notification process.   Please feel free reach out to schedule a consultation with our team.