At a Glance

• The Act prohibits the enforcement of certain noncompete covenants and, seemingly, agreements that restrict patient solicitation entered into after the effective date, January 1, 2025, by health care practitioners and their employers, subject to limited, but important, exceptions.
• Importantly, the Act does not apply to agreements with a duration of one year or less.

On July 17, 2024, Gov. Josh Shapiro signed the Fair Contracting for Health Care Practitioners Act (the Act) into Pennsylvania law. The Act prohibits the enforcement of certain noncompete covenants entered into after the effective date by health care practitioners and their employers, subject to limited, but important, exceptions.

Here are the key takeaways:

Noncompete Covenants

Noncompete covenants are defined by the Act as any agreement that has the effect of impeding the ability of a health care practitioner to continue treating or accepting for treatment any individuals to whom the health care practitioner rendered professional services for compensation. Therefore, subject to the below exceptions, the Act seemingly prohibits not only patient-based noncompetes, but also agreements that restrict patient solicitation.

Health Care Practitioners

The Act defines health care practitioners as medical doctors, doctors of osteopathy, certified registered nurse anesthetists, certified registered nurse practitioners, and physician assistants. The Act does not apply to registered nurses or other medical professionals not listed above.

Exceptions and Non-applicability

The Act provides that employers may enforce noncompete agreements if the length of that covenant is one year or less, provided that the employer did not dismiss the health care practitioner. Additionally, the Act does not (1) prohibit contract provisions allowing employers to recover reasonable expenses from a health care practitioner, provided those provisions comply with certain requirements; or (2) void noncompete covenants entered into with health care practitioners with an ownership interest in a business entity in connection with certain business acquisitions or transactions.

Patient Notification

After a health care practitioner departs from an employer, the Act requires employers to notify any patient whom that practitioner (1) had an ongoing outpatient relationship with for two or more years, and (2) saw within the past year. The notice must be within 90 days of the practitioner’s departure, and include: (1) a statement that the health care practitioner has departed; (2) information regarding how the patient may transfer their health records to another health care practitioner; and (3) a statement that the patient may be assigned to a new health care practitioner within the employer’s organization, if the patient chooses.

Effective Date

The Act is scheduled to go into effect on January 1, 2025.

What Does This Mean for Employers?

Unlike the FTC Noncompete Rule, which remains in doubt because of ongoing litigation, this Act will almost certainly go into effect on the above effective date. Therefore, Pennsylvania health care employers should review their employment agreements and revise them to ensure compliance.

We will continue to monitor the Act for important developments and address the business and legal implications for employers.