Pennsylvania’s new noncompete law

Pennsylvania has now joined the growing list of jurisdictions prohibiting the enforcement of noncompete and nonsolicitation agreements for certain health care providers.
The Fair Contracting for Health Care Practitioners Act applies to medical doctors, doctors of osteopathy, certified registered nurse practitioners and certified registered nurse anesthetists and physician assistants.

The Act prohibits the enforcement of agreements entered into on or after Jan. 1, 2025, with an employing health care facility or office that have the effect of “impeding the ability of the health care practitioner to continue treating patients or accepting new patients” whether practicing independently or working for a competitor.

Exceptions

The act contains a few exceptions to the prohibition on noncompetes, including:
• Noncompete agreements that are no more than one year in length as long as the health care practitioner was not dismissed by the employer. The act is silent on whether “for cause” dismissals by the employer will prevent the enforcement of an otherwise enforceable non-compete agreement.
• Noncompete agreements entered into by health care practitioners with an interest in a business entity shall not be rendered unenforceable as a result of the purchase, sale or transfer of control of the business entity, unless the health care practitioner is not a party to the sale, transfer or other disposition of the business entity.

Recovery of sunk costs

Additionally, employers are permitted to recover reasonable expenses from a health care practitioner who leaves their employment, if the expenses are (a) directly attributable to the health care practitioner and accrued within the three years prior to the separation, unless the employer dismissed the employee, (b) related to relocation, training and establishment of a patient base, and (c) amortized over a period of up to five years from the date of separation.

Again, the law is silent on whether dismissal of an employee for cause would allow an employer to recoup these expenses.

Patient notification

The law also contains important notification requirements, including that patients who have been with the practice for at least two years be notified within 90 days of a health care practitioner’s departure if the patient was seen in the past year by the health care practitioner.

The notice must also include how the patient may transfer the patient’s medical records to another health care practitioner.

Barry F. Rosen heads Gordon Feinblatt’s health care practice group and can be reached at 410-576-4224 or [email protected]. Darci M. Smith is a member of Gordon Feinblatt’s health care practice group and can be reached at 410-576-4153 or [email protected].