As expected, following the end of the Federal Trade Commission's proposed rules prohibit non-competitors from employers, the state has stepped up efforts to limit non-competitive agreements.
In 2024, Pennsylvania reported that it had passed a fair contract under the Healthcare Workers Act that barred the enforcement of certain non-competitive contracts entered into by healthcare workers and employers. Currently, Louisiana, Maryland and Indiana are on a list of states that limit or attempt to restrict the use of non-competitive contracts in the healthcare industry.
Louisiana
On January 1, 2025, Act No. 273 (F/K/A Senate Bill 165) (“ACT”) became effective with the approval of Gov. Jeff Landry. The Act enacts three subsections: Section 23:921, M, N, and O. This generally limits the non-competitive time frame and geographical range of primary care and specialist physicians, as explained further below.
Subsection (M) of the Act prohibits agreements that suppress primary care physicians, defined primarily as a physician who practices general family medicine, general internal medicine, general obstetrics, or general gynecological medicine, as they practice medicine for more than three years from the effective date of the initial contract or contract. Subsequent agreements between the employer and the primary care physician after a three-year term cannot be included in non-competent activities. If a primary care physician terminates his contract prior to his three-year term, within two years of the end of employment, the primary care physician can be prohibited from working in a similar business as a parish employer (1) (as defined in the employer agreement).
Subsection (n) applies to “non-primary care physicians,” commonly defined as “specialist.” Subsection (n) prohibits contracts or contracts that prevent specialists from practicing medicine for more than five years from the effective date of the initial contract or contract, and subsequent agreements after five years cannot include non-competition. If the specialist terminates the contract prior to his five-year term, the same restrictive clauses as in Subsection (M) apply.
Finally, subsection (o) of the Act exempts the prohibition of the Act (1) “Practitioners who have contracted or contracted with a rural hospital as provided for in the Rural Hospital Preservation Act” and (2) “Practitioners who have contracted or contracted with a federally accredited health care center (.).”
This Act applies to contracts or contracts entered into after January 1, 2025. For contracts or contracts prior to the effective date, the first three or five years term and geographical restrictions listed in the law begin on January 1, 2025.
Maryland
Maryland is also taking part in the list of states that restrict non-competitors of physicians. Maryland House Building 1388 (HB 1388) is effective July 1, 2025, amending Maryland's Annotated Coded Labor and Employment Section 3-716(a) to prohibit certain veterinary and healthcare non-competitive contracts and conflict of interest clauses.
HB 1388 prohibits (1) the provision of non-competition and conflict of interest between employers and employees who are less than 150% or 150% of the state's minimum wage. (2) is a veterinarian or technician who must be licensed under Maryland Health Occupational Articles or is employed in a position to “provide direct patient care” and earn less than $350,000 a year, or (3) is a veterinary practitioner or technician who is licensed under Maryland Agricultural Articles.
For employees who need to be licensed under a Maryland Health Occupation article or “providing direct patient care” and earning more than $350,000 a year, the non-competitive agreement or conflict of interest provisions are permitted only for one year from the last day of employment and cannot exceed 10 miles from their primary location of employment. If a patient requests a new location for a former employee, the employer must provide the requested information.
Indiana
On January 13th, 2025, the Indiana Senate introduced Senate Bill 45 (SB 45). SB 45 does not apply to non-competitors of physicians concluded prior to the effective date, rather it is only actively applied. SB 45 does not include any other exceptions.
These three states are just the recent developments of national laws that show a growing trend to limit or prohibit non-competitive agreements, particularly in the healthcare industry. Other states could follow. We will continue to monitor SB 45 and provide further updates on this topic.
Gianna Dano, law clerk at Epstein Becker & Green's Newark office (not permitted to practice), helped prepare the piece.
(1) “Parish” refers to a local government plot in Louisiana. This is similar to counties in other states.
