On June 20, 2025, Texas governor Greg Abbott signed Senate Bill 1318, initiating major changes in the scope and enforceability of non-competition covenants that are commonly included in the sale of a medical practice or other business arrangements, including employment or independent contractor agreements involving healthcare professionals. Texas law has long had specific requirements for non-competition agreements involving physicians, but the new law drastically changes those requirements and extends them to include other non-physician medical providers.
Specifically, SB 1318 amends Sections 15.50 & 15.51 of the Texas Business & Commerce Code pertaining to covenants not to compete for physicians, as well as dentists, physician assistants, and nurses. Beginning September 1, 2025, any covenant restricting competition by a physician, dentist, physician assistant, and nurse must:
- Expire no later than one year from the termination of their employment or contract;
- Limit the geographical area subject to the covenant to no more than a five-mile radius from the location where the physician, dentist, physician assistant, or nurse primarily practiced before termination;
- Provide for a buyout of the covenant by the physician, dentist, physician assistant, or nurse in an amount that is not greater than their total annual salary; and
- Contain terms and conditions that are clearly and conspicuously stated in writing.
Additionally, if a physician licensed by the Texas Medical Board is involuntarily discharged without “good cause” (as defined in Section 15.50), the covenant not to compete is void and unenforceable.
The amendments to Sections 15.50 & 15.51 of the Texas Business & Commerce Code only apply to covenants not to compete entered into or renewed on or after September 1, 2025. Any covenant not to compete, entered into or renewed prior to September 1, 2025, will continue to be governed by the law in effect at the time the covenant was entered into or renewed.
