Trade Secrets & Employee Mobility

In March of this year, Arkansas Governor Sarah Huckabee signed into law a bill titled “An Act To Clarify That a Covenant Not to Compete Agreement Is Unenforceable for Certain Licensed Medical Professionals" (the “Act”).  The Act amends Arkansas’s statute governing noncompete agreements to clarify that any noncompete that “restricts the right of a physician to practice within the physician’s scope of practice is void.” 

The Act is set to take effect 90 days after the conclusion of the current legislative session, so it is anticipated that the Act will take effect on or about July 15, 2025.  The Act does not state whether it applies prospectively only or whether it will have retroactive effect, and, therefore, invalidate existing physician noncompete agreements. 

The Act defines “physician” as any person authorized or licensed to practice medicine under the Arkansas Medical Practices Act or a person authorized to practice osteopathy under Arkansas statute. 

As anticipated, following the end of the Federal Trade Commission’s proposed rule prohibiting employer noncompetes, states have ramped up their efforts toward limiting noncompete agreements, including some states that have specifically focused on health care noncompetes. We previously reported in 2024 that Pennsylvania passed The Fair Contracting for Health Care Practitioners Act that prohibited the enforcement of certain noncompete covenants entered into by health care practitioners and employers. Now, Louisiana, Maryland, and Indiana join the list of states limiting, or attempting to limit, the use of noncompete agreements in the health care industry.

Louisiana

On January 1, 2025, Act No. 273 (f/k/a Senate Bill 165) (the “Act”) became effective following Governor Jeff Landry’s approval. The Act enacts three subsections to Section 23:921, M, N, and O, which, as discussed further below, generally limit the timeframe and geographical scope of noncompetes for primary care and specialty physicians.

As we have previously reported, the Colorado Assembly passed sweeping changes to the state’s noncompete law that, among other things, (1) set compensation floors for enforcement of both noncompetes ($101,250) and customer non-solicitation agreements ($60,750), which will be adjusted annually based on inflation; (2) require a separate, standalone notice to employees before a new or prospective worker accepts an offer of employment, or at least 14 days before the earlier of: (a) the effective date of the restrictions, or (b) the effective date of any additional compensation or changes in the terms or conditions of employment that provide consideration for the restriction, for existing workers; and (3) prohibit the inclusion of out-of-state choice-of-law and venue provisions. Those amendments take effect today, August 10, 2022.

Compliance with these amendments is even more important due to a prior amendment, effective earlier this year, which provides that violations of Colorado’s noncompete law can subject employers to criminal liability (a Class 2 misdemeanor, which carries possible punishment of 120 days in prison, a $750 fine per violation, or both), as well as hefty fines and possible injunctive relief and attorneys’ fees to aggrieved workers.

We have written recently about legislative action in various states concerning their restrictive covenant laws, including Washington state’s prohibitions on nondisclosure and nondisparagement provisions in employment agreements, a proposal in Connecticut to codify limitations on noncompetes, and a law passed in Colorado that would limit the use and enforcement of noncompetes and non-solicitation provisions. Another state that is considering new noncompete legislation is New Hampshire.