House General & Housing committee debates S.230 non-compete language, defers final action

The House Committee on General & Housing on Thursday reviewed draft 5.1 of S.230's provisions that would restrict agreements not to compete for lower-paid workers and health care providers, but it did not vote and instead asked counsel for a revised draft.

Sophie, an attorney with the Office of Legislative Council, guided members through the new subsection labeled 3B and the health-care-specific language provided by the medical society. "This would provide that contracts and agreements involving health care providers will be void, unenforceable, and against public policy," Sophie told the committee as she summarized the draft language and the patient-notification elements it would allow.

Counsel said the draft ties protection to the Fair Labor Standards Act's non-exempt/exempt test rather than to a fixed salary cutoff. She and several members warned that a simple salary threshold can change with federal rulemaking and said misclassification risk is a key enforcement concern. "If you hook it just to the salary threshold, the problem with that is that different administrations have come in and that number has ricocheted around," Sophie said, noting the federal salary test cited in committee discussion was roughly $35,000.

Some members pointed to H.205's approach of tying a cutoff to a percentage of the state minimum wage (the draft cited 300% as an example, roughly $90,000) as a more stable alternative to a fixed dollar amount. Counsel said the FLSA test is more complete because it combines a salary test with a duties test and is something employers and courts are already using to identify exempt versus non-exempt employees.

The committee also examined health-care-specific clauses that would: bar restrictions preventing a health care provider from practicing in a geographic area after leaving a relationship; allow a departing provider to notify patients of changed contact information; and prohibit clauses that lock up a provider's ability to solicit patients who directly received care. Counsel explained that H.205 had similar provisions and recited H.205's broad statutory definition of "health care provider," which covers licensed professionals who deliver medical care, chronic-care management, and other medically necessary services.

Members debated remedies and severability. One member said the draft's opening paragraph could be read to void entire contracts that contain a prohibited clause and suggested narrowing remedies so only the offending term is unenforceable. "I don't think the whole contract should be voided because of this," the member said, urging language that would nullify only the non-compete clause or the specific term rather than every negotiated provision.

A new subsection in the draft, not present in H.205, would exclude restrictions that limit a health care provider who contracts with a third-party nonclinical business-support vendor from opening a similar nonclinical business supported by a different third-party vendor. Counsel and members said that carve-out's intent and wording are unclear and recommended further fact-gathering about how third-party administrative vendors operate in clinics and hospitals before finalizing the text.

Committee counsel also noted that the Justice language included a proposed prospective application date: the health-care-specific section (and the committee's suggested non-exempt-employee provision) would apply only to agreements entered on or after July 1, 2026, to avoid upending existing negotiated contracts.

Members raised choice-of-law concerns for clinicians who work across state lines or remotely, noting that residency, where services are delivered, and choice-of-law clauses in contracts can complicate enforcement. Counsel acknowledged the complexity and said further drafting and research would be needed to address cross-jurisdictional issues.

Given time constraints and some members' competing obligations, the committee did not take a vote. The chair asked counsel for a revised draft that addresses severability, clarifies the third-party carve-out, and simplifies the nondisparagement language; the panel will revisit the matter at a later markup or hold a hearing with witnesses if members prefer.

The committee adjourned and said it would reconvene after the floor session the next day if schedules allow.