House committee refines S.230 to bar certain health‑care noncompetes, debates legal reach

The House Committee on General and Housing on April 17 reviewed draft 6.1 of S.230, a labor‑oriented bill, focusing on a new Section 3B that would void certain contract clauses for health‑care providers. Committee counsel Sophie Zdatny, Office of Legislative Counsel, walked the panel through the changes.

"This is the new section 3B — agreements not to compete," Sophie Zdatny told the committee as she outlined the draft. The provision narrows earlier language so that only specific provisions within a contract would be void and unenforceable, rather than nullifying entire agreements.

Under the draft the committee examined, subdivision A targets restrictions that bar a health‑care provider from providing services in a defined geographic area or for a period after termination. Subdivision B limits clauses that would restrict a separating provider from giving notice of an employment change to patients they served; subdivision C would bar provisions that prevent a provider from making disparaging statements about another party or a designated third‑party beneficiary. Subdivision D declares that contract terms inconsistent with Vermont law are void, and subdivision E would render clauses unenforceable that require litigation arising from performance of the contract in Vermont to be conducted in another state.

Committee members questioned whether subsection D was necessary because, they noted, a term inconsistent with Vermont law would generally be unenforceable; counsel and members countered that explicit language helps address choice‑of‑law disputes and certain public‑policy claims (for example, protections for employees who report regulatory violations). Members also debated how courts would apply Vermont law to contracts formed or managed out of state and whether judges could apply Vermont law only to the performance‑related portions of a contract.

Members used traveling nurses and visiting providers as practical examples to test the draft. One member said the draft could allow a visiting nurse who starts a private practice in Vermont to do so under Vermont law despite portions of the employment contract that might be governed by another state. Committee members expressed concern about overbreadth and whether out‑of‑state staffing companies would resist doing business in Vermont, though a witness said New Mexico took a similar approach without losing traveling nurses.

Jessa Barnard of the Vermont Medical Society addressed the committee and said she was not "intimately familiar with the nursing licensure compact," but added that she did not expect employment‑contract law to intersect directly with licensure requirements. The committee asked stakeholders, including the medical society and provider representatives, to double‑check how the licensure compact and staffing arrangements might interact with the proposed language and to be prepared when the bill returns for further review.

No formal motion or vote was taken; members agreed to bring the draft back for more testimony and technical review next Tuesday in the early afternoon. The committee did not adopt final language during the session.

Why it matters: If enacted, the change would limit employers' ability to use certain non‑compete, non‑solicitation, confidentiality or forum‑selection clauses to restrict where and how health‑care providers practice in Vermont. Supporters say the measure protects providers and patient access, particularly in rural areas; critics worry about unintended impacts on recruitment of traveling or agency staff and the interplay with out‑of‑state contracts and licensure rules.

What’s next: The committee asked counsel and stakeholder witnesses to revisit specific choice‑of‑law and licensing questions and return with clarifications when the committee resumes consideration of S.230 next Tuesday in the afternoon.