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September 30, 2024
Last month, a federal court in Texas ruled that the Federal Trade Commission exceeded its authority in attempting to implement a nationwide ban on non-competition agreements (non-competes). See our article about that decision here. The court noted that, historically, it has been the states that have regulated non-competes. And, as this article demonstrates, states continue to do so (the Texas decision does not affect these state laws). Read on to learn how Pennsylvania, Louisiana, and Illinois will be restricting non-competes in the health care setting, beginning in 2025. And see our article here about upcoming changes (July 2025) for health care professionals in Maryland.
Pennsylvania
House Bill 1633, the Fair Contracting for Health Care Practitioners Act, will become effective on January 1, 2025. The Act allows an employer to enforce a non-compete[1] against a health care practitioner (i.e., medical doctors, doctors of osteopathy, certified registered nurse practitioners, certified nurse anesthetists, and physician assistants) only if it is no more than one year in duration and only if the health care practitioner terminated the employment relationship. The Act further allows non-competes in connection with certain sales or mergers of a business entity and in connection with certain transactions that result in a change in control of a business entity where the health care practitioner receives an ownership interest in the surviving entity.
The Act contains a requirement that employers notify certain patients[2] within 90 days of the departure of a health care practitioner. The notice must inform the patient of the departure of the health care practitioner, the patient’s right to choose to be treated by a new health care practitioner with the employer, and instructions regarding how the patient can transfer their records if they choose to continue treating with the health care practitioner who departed.
The Act will prohibit employers who terminate the employment relationship with a health care practitioner from recovering expenses related to the practitioner’s relocation, training, or establishment of a patient base. If a health care practitioner terminates the employment relationship, an employer may recover such expenses if they are reasonable and can be attributed directly to the practitioner.
Louisiana
Senate Bill 165 modifies the state’s non-compete statute (La. Rev. Stat. § 23:921) to limit non-compete provisions in contracts with physicians.
Specifically, any contract that restrains a primary care physician[3] from practicing medicine will expire three years after the effective date of the contract. For all other types of physicians,[4] such contracts will expire five years after the contract’s effective date. Any subsequent contract with such physicians may not contain a non-compete.
The geographic scope of the non-compete must be no broader than the parish where the physician’s principal practice is located plus no more than two contiguous parishes.
The temporal scope of the non-compete cannot exceed two years from the termination of employment.
As to subject matter scope, a physician may be prohibited from competing in a “like business,” which must be specified in the contract.
The law will apply to contracts with physicians executed on or after, or in effect as of, January 1, 2025.
Illinois
Senate Bill 2737 amends the Freedom to Work Act. The law renders unenforceable any non-compete or non-solicitation provision entered into after January 1, 2025 with licensed mental health professionals[5] who provide mental health services to veterans and first responders[6] if enforcement of the provisions is likely to result in an increase in cost or difficulty for any veteran or first responder seeking such services.
Healthcare Employers in Pennsylvania, Louisiana, and Illinois: Work with legal counsel to review your restrictive covenants and prepare sample patient notices to ensure compliance with these new laws. In Pennsylvania, understand the limitations on your rights if you terminate the employment relationship.
The author of this article, Patricia Tsipras, is a member of the Bar of Pennsylvania. This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice in Pennsylvania, Louisiana, Illinois, or any other jurisdiction, nor does it establish an attorney-client relationship with any reader of the article where one does not exist. Always consult an attorney with specific legal issues.
[1] The Act defines a non-compete as an agreement between an employer and a health care practitioner that 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.
[2] This notice requirement applies to patients who the health care practitioner has seen within the past year and with whom the departing health care practitioner has had an ongoing outpatient relationship for at least two years.
[3] A primary care physician is a physician who predominantly practices general family medicine, general internal medicine, general pediatrics, general obstetrics, or general gynecology.
[4] The Act does not apply to physicians employed by, or under contract with, a rural hospital. See the Rural Hospital Preservation Act.
[5] A licensed mental health professional means a person licensed under the Clinical Psychologist Licensing Act, the Clinical Social Work and Social Work Practice Act, the Marriage and Family Therapy Licensing Act, the Nurse Practice Act, or the Professional Counselor and Clinical Professional Counselor Licensing and Practice Act.
[6] “First Responders” means emergency medical services personnel, as defined in the Emergency Medical Services Systems Act, firefighters, and law enforcement officers.
