Heads up, Pennsylvania healthcare providers! The Commonwealth passed a new noncompete law.

With most eyes focused on a pending lawsuit in the United States District Court for the Eastern District of Pennsylvania to eliminate the FTC’s noncompete ban, local employers may have missed the news last week that Governor Shapiro signed into law a measure restricting the use of non-competition agreements in the healthcare industry.

The new law, the Fair Contracting for Health Care Practitioners Act, will take effect on January 1, 2025. When it does, it will prohibit any employer (person or group of persons that employ a health care practitioner at a health care facility or office) from requiring a health care practitioner (MD, DO, CRNA, CRNP, or PA) to sign a “noncompete covenant.”

“Noncompete covenant” is a bit of a misnomer. The statute defines it as “an agreement that is entered into between an employer and a health care practitioner in this Commonwealth 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.”

The law further defines “patient” as an individual to whom a health care practitioner rendered professional services in the health care practitioner’s scope of practice for which compensation has been received by the health care practitioner, regardless of the source of the compensation.

So, the law effectively prohibits agreements with either non-competition or non-solicitation provisions.

However, there are some exceptions:

• Agreements entered into before January 1, 2025 are fair game, presumably subject to reasonable restrictions on time and geography (i.e., a nationwide ban on competition for ten years won’t work).
• An employer can enforce agreements entered after December 31, 2024, if the noncompete covenant is no more than one year long, provided that the health care practitioner was not dismissed (presumably without cause, although the law is silent) by the employer.
• Employers can enter into noncompetes with health care practitioners with an interest in a business entity in connection with certain mergers and acquisitions.

The new law also requires employers to notify certain patients about:

1. The health care practitioner’s departure.
2. If the patient chooses to receive care from the departed health care practitioner or another health care practitioner, how the patient may transfer the patient’s health records to a health care practitioner other than with the employer.
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.

Regardless of what happens with the FTC’s noncompete rule, 2025 will usher in an erosion of restrictive covenants in the health care industry in Pennsylvania.