Provider Alert: A New Law will Restrict Noncompete Covenants with Pennsylvania-Based Health Care Workers Starting on January 1, 2025

On July 17, 2024, Pennsylvania enacted the Fair Contracting for Health Care Practitioners Act, 35 P.S. § 10323, et seq. (the “Act”). The Act takes effect on January 1, 2025, and will render as void and unenforceable certain noncompete covenants with health care practitioners. Accordingly, it is imperative that impacted Pennsylvania providers understand the ramifications of the Act and the extent to which the current and future noncompete covenants may be affected.

Covered Health Care Practitioners

The Act defines “Health Care Practitioners” as follows:

1. Medical Doctors;
2. Doctors of Osteopathy;
3. Certified Registered Nurse Anesthetists;
4. Certified Registered Nurse Practitioners; and
5. Physician Assistants

The Act does not apply to any other health care professionals not listed above.

Definition of Noncompete Covenants

The Act defines a “noncompete covenant” broadly as “any agreement that is entered into between an employer and a health care practitioner in [Pennsylvania] 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.” This definition is broad enough to include traditional non-competition provisions as well as covenants that restrict patient solicitation.

Applicability of the Noncompete Ban

Starting on January 1, 2025, noncompete covenants with health care practitioners shall be deemed contrary to Pennsylvania public policy and rendered void and unenforceable under the Act with three notable exceptions:

First, an employer may seek to enforce a noncompete covenant which is one year or less in duration, but only when the health care practitioner quits or otherwise ends the employment relationship voluntarily. Importantly, the Act renders all noncompete covenants unenforceable when a health care practitioner is dismissed by the employer. 

Second, noncompete covenants with a health care practitioner with an interest in a business entity are enforceable in connection with:

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; or
3. The health care practitioner’s receipt, by purchase, grant, award, issuance or otherwise, of an ownership interest in the business entity.

Third, upon the voluntary departure of a health care practitioner, an employer may enforce contract provisions to recover certain reasonable expenses relating to relocation, training, and establishment of a patient base, but an employer may not recover such expenses when the health care practitioner’s employment is terminated by the employer.

Patient Notification

The Act also imposes a patient notification requirement following the departure of a health care practitioner. All of a health care practitioner’s patients “seen within the past year” and with whom the health care practitioner had “an ongoing outpatient relationship” of two or more years must be notified, within ninety days of the practitioner’s departure of the following:

1. The health care practitioner’s departure. including the date of departure.
2. How the patient may transfer the patient’s health records to a health care practitioner other than with the employer, if the patient so chooses.
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.

What Does This Mean for Employers

Employers of Pennsylvania-based health care practitioners should take note of the broad scope of the Act, review existing noncompete covenants now, and consult with counsel before entering into any new noncompete covenants with health care practitioners on or after January 1, 2025. Frier Levitt has a dedicated team of attorneys who specialize in drafting restrictive covenants and, when necessary, litigating the enforceability of such covenants.