On July 17, the Pennsylvania House Bill (HB) 1633 or the “Fair Contracting for Health Care Practitioners Act” was signed into law. What does this new law mean for health care practitioners in the Commonwealth, and how will this be impacted by the Federal Trade Commission’s rule on banning noncompete agreements across all industries? 
Overview of HB 1633
Beginning January 1, 2025, certain noncompete agreements will no longer be enforceable. This law extends to health care practitioners – medical doctors, doctors of osteopathy, nurse anesthetists, nurse practitioners, and physician assistants – and applies only to new agreements entered into with employers after this date.
Additionally, employers will be required to notify patients when their health care practitioner has left their practice:
- Within ninety days of departure
- How patients can transfer their records, and
- If they choose, they may be assigned to a new health care practitioner at the practice
Of course, there are exceptions to HB 1633, giving provisions to employers, including:
- Length – employers can enforce agreements if they last no more than one year and the practitioner was not dismissed
- Recovery of expenses – an employer may seek to recoup “reasonable expenses” from the practitioner within the three years prior to separation, including those “related to relocation, training and establishment of a patient base”
FTC Noncompete Ban
Scheduled to take effect on September 4, a Federal Trade Commission (FTC) rule bans noncompete agreements in most employment contexts and rescinds most existing noncompetes. However, on August 20, a federal judge ruled the ban violates the Administrative Procedure Act and exceeds the agency’s statutory authority, specifically citing the ban was “unreasonably overbroad without a reasonable explanation.” The August 20 ruling will likely be appealed and is possibly headed to the United States Supreme Court.
Similar to HB 1633, the FTC ban also includes exceptions, most notably for senior executives earning above $151,164 (annually) and in policy-making roles. Nonprofits – which includes many of PA’s health care organizations – are arguably outside of FTC’s jurisdiction, but the FTC has stated it will review whether a 503(c) tax-exempt organization is truly engaged in business only for charitable purposes and directs its proceeds to public, rather than private, interests. Lastly, the new rule does not apply to noncompetes entered into by a person pursuant to the sale of a business.
Will the FTC ban impact PA’s Fair Contracting for Health Care Practitioners Act?
For decades, health care noncompete clauses have been viewed as a way for hospitals and health networks to ensure the continuity of their workforce and discourage employees from leaving employment.
If the FTC noncompete ban doesn’t stand, Pennsylvania’s Fair Contracting for Health Care Practitioners Act will likely stand as is.
However, if the FTC ban somehow does withstand legal challenges, it would extend to health care practitioners, striking down the new one-year noncompete allowance and banning noncompetes subject to the exclusions in place.
Legal guidance amidst overlapping legal statutes
Both employers and health care practitioners in PA should be prepared to make adjustments with the passing of HB 1633 as we head into 2025 and the implications of the FTC noncompete ban, which remains up in the air.
The ban on noncompete agreements exceeding one year represents a major shift in PA’s health care employment landscape. By adapting to these changes proactively, both employers and employees can navigate the new legal environment effectively and continue to thrive in the evolving healthcare sector.
Legal counsel will be crucial in navigating these adjustments to ensure compliance and minimize risks. Health care practitioners can also leverage legal support in negotiating future employment contracts, now with potential enhanced leverage without a noncompete.
Reprinted with permission from the Fall 2024 Edition of Lehigh County Health & Medicine © 2024 All rights reserved. Further duplication without permission is prohibited.
