Healthcare providers and employees should take note of the recent passage of South Dakota House Bill 1154, which becomes effective on July 1, 2021. Davenport Evans lawyer Mike Srstka explains.
The new law prohibits the inclusion of non-compete clauses in employment contracts, including partnership contracts and any other professional relationships, for specific healthcare providers, including physicians, physician assistants, certified nurse practitioners, certified nurse midwives, certified registered nurse anesthetists, registered nurses, and licensed practical nurses.
The new law, codified as SDCL § 53-9-11.1, provides that no contract may restrict the right of the healthcare provider to practice or provide services “in any geographic area and for any period of time, after the termination of … employment.” The prohibition of this section does not apply to a contract in connection with the sale and purchase of a practice.
The language of HB 1154 does not clarify whether the restriction will apply to existing contracts. However, the South Dakota Constitution and statutes provide that new laws passed by the legislature generally do not have retroactive effect, so it is likely the case that the non-compete provisions contained in existing contracts will remain binding and enforceable after July 1, so long as the agreement was signed before the new law takes effect.
Healthcare workers should keep in mind that there are limits to non-compete provisions, as courts will only enforce them to the extent they are reasonable in scope. If you have a question about drafting employment contracts or if you have questions regarding an agreement you are asked to sign, you should consider seeking advice from an attorney.