On June 5, 2023, the Connecticut Legislature passed Public Act No. 23-97, “An Act Concerning Health and Wellness for Connecticut Residents” (“the Act”). Sections 13 through 15 of the Act make important changes to Connecticut law governing physician, physician assistant (PA), and advanced practice registered nurse (APRN) non-compete agreements. These changes are summarized below and scheduled to take effect July 1, 2023. Governor Lamont is expected to sign the Act but has not done so as of the date of this publication.
Physician Non-Compete Agreements
Existing Connecticut law requires physician non-compete agreements to meet certain requirements in order to be enforceable. Physician non-competes may not have a duration of more than one year, and must be (i) limited to a 15-mile radius from the physician’s primary practice site, (ii) separately and individually signed by the physician, (iii) necessary to protect a legitimate business interest, (iv) reasonably limited in time, geographic scope, and practice restrictions as necessary to protect such business interest, and (v) otherwise consistent with law and public policy. (See Connecticut General Statutes § 20-14p).
The Act first changes the definition of “primary practice site” (which currently is based on where the physician generates a majority of professional revenue) to instead require the primary practice site to be a single location, mutually agreed upon by the parties, and expressly defined in the non-compete agreement.
The Act also newly provides that physician non-compete agreements entered into, amended, extended, or renewed on or after October 1, 2023, are generally unenforceable if (i) the physician does not agree to a proposed material change to the compensation terms of employment before the agreement is extended or renewed and (ii) the agreement expires or is terminated by the employer, other than a termination for cause. Notably, this new directive related to material compensation changes does not apply to a non-compete agreement between a physician and a group practice of 35 physicians or less if the physicians own a majority of the practice.
APRN and PA Non-Compete Agreements
Connecticut previously did not place statutory limitations on APRN or PA non-compete agreements. The Act implements new limitations on APRN and PA non-compete agreements similar to the limitations on physician non-compete agreements. The Act applies to APRN and PA non-compete agreements entered into, amended, extended, or renewed on or after October 1, 2023. Such APRN and PA non-compete agreements may not have a duration longer than one year and must be limited to a 15-mile radius from the primary site where the APRN or PA practices. The definition of primary site for APRNs and PAs matches the definition of primary site for physicians (i.e., it must be a single location agreed upon in writing between the parties to the agreement). Additionally, under the Act, as with physician non-competes, an APRN or PA covenant not to compete is valid and enforceable only if it is (i) necessary to protect a legitimate business interest, (ii) reasonably limited in time, geographic scope, and practice restrictions as needed to protect that interest, (iii) separately and individually signed by the APRN or the PA, and (iv) otherwise consistent with law and public policy.
The Act also establishes exceptions to the enforceability of APRN and PA non-compete agreements consistent with those applicable to physician non-compete agreements. For example, APRN and PA non-compete agreements are unenforceable when an employer terminates the employment relationship without cause, or when the employment agreement was not made in anticipation of a partnership or ownership agreement and the agreement expires or is not renewed, unless before such expiration or non-renewal the employer made a bona fide offer to renew the agreement on the same or similar terms. The Act additionally deems APRN and PA non-compete agreements unenforceable when the APRN or PA does not agree to a proposed material compensation change in connection with a renewal or extension of an agreement, and the agreement is not renewed by the employer or is terminated by the employer (other than for cause). However, the PA and APRN non-compete provisions of the Act notably do not contain the exception described above concerning enforceability of a physician non-compete regardless of a material compensation change by a group practice of 35 physicians or less that is a majority physician-owned.
Effective Date & Additional Changes in the Act
The Sections of the Act described above will take effect on July 1, 2023, absent an unexpected veto of the Act by the Governor, but as noted above the material statutory changes will apply to non-compete agreements entered into, amended, extended, or renewed on or after October 1, 2023.
The Act also makes various changes to Connecticut health care laws in other areas, including licensure, hospital privileges, medical records requests, and the opioid prescribing process. These changes will be discussed in detail in future Health Law Diagnosis posts.