On June 20, 2025, Texas Senate Bill 1318 was signed into law, introducing new restrictions on noncompete agreements entered with physicians licensed by the Texas Medical Board and other healthcare practitioners in Texas. Effective September 1, 2025, the statute requires physician noncompetes to contain a strict duration, geographic scope, and buyout terms to be enforceable, and poses additional restrictions for noncompetes with dentists, nurses, and physician assistants.
BEFORE THE CHANGES
Existing Texas law treats physician noncompetes as a distinct category. Under the Texas Business & Commerce Code 15.50(b), a physician covenant is enforceable only if it meets a strict criteria, in addition to the reasonableness standard that applies generally to all Texas noncompetes.
Before this change, physician noncompetes in Texas were only enforceable if they:
- allowed the physician access to a list of the patients seen or treated within one year from the physician’s termination or contract expiration, along with access to those patients’ medical records upon the patients’ authorization;
- allowed the physician to continue providing care and treatment to patients suffering an acute illness, even after the physician’s termination or contract expiration; and
- allowed the physician a “reasonable” buyout option (determined through arbitration in cases of dispute).
Notably, the statute did not provide hard limits on the covenants’ duration or geographical limitation.
THE AMENDMENTS—TEXAS SENATE BILL 1318
Texas Senate Bill 1318 largely keeps the existing criteria for physician noncompetes in place but adds new time and geographical limitations to those criteria, as well as additional substantive and procedural requirements. Physician noncompetes must now be limited to a duration of one year; a geographic scope of no more than five miles from the physician’s “primary practice location” (measured as of the termination date); and a maximum buyout amount equal to the physician’s total annual salary and wages at the time of contract termination. Notably, the “reasonable” price and arbitration provision are eliminated.
The new statute also requires the terms of the restriction to be “clearly and conspicuously” set out in writing. And significantly, the noncompete is unenforceable if the physician is involuntarily terminated without “good cause,” which the amendment defines as “a reasonable basis for discharge of a physician from contract or employment that is directly related to the physician’s conduct, including the physician's conduct on the job or otherwise, job performance, and contract or employment record.”
The amendment also clarifies that Section 15.50(b) applies only to those physicians who are actively engaged in the “practice of medicine” and expressly excludes physicians who manage or direct medical services in an administrative capacity. Noncompete agreements for physicians working in an administrative capacity would instead be governed by Section 15.50(a), which applies to all other Texas employee noncompetes.
Finally, the amendment adds a new Section 15.501 of the Texas Business & Commerce Code, which imposes new restrictions on noncompetes for other healthcare practitioners, including dentists, nurses (professional and vocational), and physician assistants. For these covered practitioners, an enforceable noncompete must now contain a buyout provision (capped at the practitioner’s annual salary and wages at the time of termination); a maximum one-year limitation; and a maximum geographical radius of five miles from the practitioner’s primary practice location. The clear-writing requirement also applies to these practitioners. But notably, unlike the requirements for physician noncompetes, termination for “good cause” is not required.
NEXT STEPS FOR HEALTHCARE EMPLOYERS
Texas healthcare employers should consider proactively implementing changes to be in compliance with this amendment. First, employers should audit existing noncompetes involving physicians, dentists, nurses, and physician assistants to determine whether any agreements are subject to autorenewal or renegotiated after September 1, 2025. Although the statutory changes do not retroactively affect existing agreements, the changes will affect any new agreement executed or renewed after September 1, 2025.
Second, employers should audit existing agreement templates to align with the statutory changes. Employers should ensure the agreements reflect the tightened duration and geographical scope and adjust the buyout amount. For agreements with covered practitioners working remotely or at multiple locations, consider explicitly designating the “primary practice location” to avoid disputes.
Third, employers should develop guidelines for documenting involuntary terminations, especially for physicians. Employers must support physician termination with a thoroughly documented rationale because the enforceability of a noncompete against a physician will hinge on whether the physician was terminated for “good cause.”
Lastly, employers should inform their HR, legal, and recruiting teams of these changes. Deviations from the amended statute’s requirements may result in unenforceable agreements or litigation.
