Legal agreements that prohibit working professionals from taking their talents to other employers are not a new phenomenon. The early roots of noncompete agreements date all the way back to the medieval period, and cases establishing the legal grounds of the practice were decided in the 17th, 18th, and early 19th centuries.
Now, in 2025, these agreements have become a relevant topic of public discourse. In a recent poll by global market research firm Ipsos, it was concluded that the majority of Americans supported the Federal Trade Commission’s (FTC) proposed ban of noncompete agreements for most jobs. The FTC’s proposed ban was halted, however, due to a ruling from a U.S. District Court in Texas claiming the FTC exceeded its rulemaking authority with the proposed law.
While the FTC’s proposal remains in the appeals process, it has not stopped various state legislatures from passing local bills addressing similar issues, including in Indiana.
What the New Law Covers – And what it Doesn’t
Indiana’s new noncompete ban for the healthcare industry, SEA 475, states that a physician may not enter into a noncompete agreement with a hospital or any entity affiliated with a hospital. While an earlier version of the bill proposed a comprehensive ban for all physicians regardless of place of employment, the passed legislation was scaled back to exclude non-hospital healthcare facilities, private practices, and independent physician groups in the noncompete agreement ban. Locally-owned hospitals and state professional licensing agencies are directly affected under the new law.
SEA 475 specifically covers noncompete agreements drafted and agreed to on or after July 1, 2025, and will not negate any agreements made before that date. The new bill is designed specifically to not allow agreements between healthcare professionals and hospitals in which the physician is prohibited from engaging in their practice with a new employer, is sanctioned with financial penalties for leaving after 3 years of employment, or is required to obtain employer consent to practice elsewhere. The new law does not include non-disclosure agreements that protect confidential information or non-solicitation agreements regarding current employees.
Balancing Compliance and Leverage
Hospitals that fall under the legal definition applied in this law will have some work to do in order to navigate this new reality. The updating of practices and records to ensure compliance with the state’s new statute will be a lengthy process. These hospitals will also have to shift their hiring and retention practices if they wish to keep an experienced roster of doctors on staff. In the past, these entities were able to rely on legal pressure in order to keep their employees; now, they will have to put time and effort into retention strategies such as competitive pay, growth opportunities, and striving for a positive culture in the workplace.
Physicians will now have greater freedom to move and ply their trade in the environment they choose. Independent practices will be easier to establish as they will no longer be restricted by geographical limits. Legislators in support of the bill said these changes have the potential to be a real benefit for Hoosiers. If the intended purpose of the new law is fulfilled, Indiana residents will have access not only to a wider selection of doctors but also to healthcare professionals who are more satisfied with their workplace.
"This freedom for physicians will help foster better long-lasting patient-doctor relationships, and that's what should be at the core of health care," said state Sen. Justin Busch (R-Fort Wayne) in a press release. Busch was one of the authors of the bill. "By allowing patients to stay with the doctors they trust and who know them best, Hoosiers can receive the high-quality care and attention they deserve."
Reform Taking Shape
Indiana’s move to relax the restriction of noncompete agreements, at least in the healthcare sector, joins a national shift in addressing employment bans. According to the Economic Innovation Group, 33 other states besides Indiana restrict noncompete agreement use, and four states ban the practice entirely. These state-specific bans run the gamut when it comes to how restrictive they are and what industries they affect.
Pertaining to healthcare specifically, Indiana joins Montana, Colorado, Oregon and Utah in increasing restrictions on the use of noncompete agreements in healthcare fields.
