Employment & Labor Law

Noncompete agreements for certain medical providers in Pennsylvania, signed on or after January 1, 2025, will only be permissible in limited circumstances. This is as a result of the newly enacted “Fair Contracting for Healthcare Practitioners Act.” Noncompete agreements signed prior to 2025 appear to be unaffected by this law until they expire and new agreements are executed. The legislature’s stated purpose for the law is to avoid deterring healthcare providers from working in or leaving Pennsylvania, to provide continuity of care for patients, and to counterbalance the power of large hospital systems.

The new law applies to medical doctors, osteopathic doctors, certified registered nurse anesthetists, certified registered nurse practitioners, and physician assistants. It does not limit or change current law on noncompete agreements for other healthcare professionals, such as psychologists or other non-physician mental health counselors.

For agreements entered into on after January 1, 2025 with covered Pennsylvania healthcare providers, non-competes are only permissible in the following situations:

• post-employment noncompete agreements not longer than one year and then only if the healthcare practitioner’s employment departure was not due to a dismissal by the employer; and
• as part of the sale or acquisition of an ownership interest in the employer that includes the power to direct the management and policies of the employer (that is, noncompetes remain permissible for healthcare providers as part of their becoming shareholders/owners, or when selling the practice or their share in it; and the one year limited time duration mentioned above does not appear to apply here).

The new law does permit healthcare employers to enter into contracts requiring practitioners who voluntarily leave a practice (i.e., are not dismissed by the employer) to reimburse the employer for its reasonable expenses directly due to relocation, training, and establishing a patient base for the departing healthcare provider during the three years immediately preceding the employment separation, provided these payments are spread out over a period of not longer than five years after separation.

Lastly, this statute requires healthcare employers to issue patient notifications within ninety days after a covered healthcare provider leaves the organization. This notice is to go to all patients seen in the past year by the departing practitioner. The notice must tell the patients of the practitioner’s departure, how medical records can be transferred if the patient wants to continue using that practitioner, and that the patient may be assigned to a  different practitioner if wishing to remain with same healthcare organization.

This statute does not explicitly state whether, in addition to non-competes, it also restricts health care employers from using non-solicitation agreements (i.e., barring healthcare providers from soliciting their patients to follow them to their new practice when they change employers). This will doubtless be the subject of litigation. The reason for the uncertainty is two fold. First, the statute implies strong support for patients following their covered healthcare providers to their new employer by virtue of the requirement for the former employer to give patients notice of the practitioner’s departure and how to transfer their records to the new practice. Also, the statute’s definition of a “noncompete” is an agreement that “has the effect of impeding the ability of the health care practitioner to continue treating patients … after the term of employment.” These strongly indicate that non-solicitation agreements are contrary to the purpose of the statute. However, the counter-argument by health care providers will be that the statute provides the means for notifying patients about a provider’s departure and thus permits an agreement barring a provider from doing more than this when changing employment (e.g., directly contacting the patients themselves).

In summary, the new law greatly lessens the availability of future noncompete agreements for covered Pennsylvania healthcare providers. Healthcare employers will need to use different provisions in their restrictive covenant agreements signed with covered providers when the current ones expire, starting next year. Practitioners will want to know their rights when negotiating these agreements. Your Houston Harbaugh employment and health care attorneys are available to assist with this, including the author of this article.

Pennsylvania Restricts Noncompete Agreements for Healthcare Providers