Texas Amends Restrictive Covenant Laws for Healthcare Providers

As state legislatures continue to reshape the landscape of restrictive covenants in the wake of federal uncertainty, Texas is one of the latest to amend its existing laws governing non-compete agreements for healthcare workers.

Texas Senate Bill (SB) 1318, which takes effect on September 1, 2025, tightens Texas’ already well-regulated statute by further restricting the enforceability standards for physician non-competes and, for the first time, extends similar restrictions to other licensed healthcare practitioners. 

Key Changes to Physician Non-Compete Agreements

In June 2025, Texas Governor Greg Abbott signed SB1318 into law, which, effective September 1, 2025, revises Sections 15.50 and 15.52 of the Texas Business & Commerce Code, and adds a new Section 15.501.

Under the new language, a non-compete is enforceable against a physician licensed by the Texas Medical Board only if it meets all of the following conditions:

1. Patient Access, Medical Records, and Continuity of Care
   • The physician must have access to a list of patients seen or treated within one year of termination.
   • Medical records must be accessible upon patient authorization, and copies must be available for a reasonable fee.
   • Access to such records must not require a different format than how the records are normally maintained, unless both parties agree otherwise.
   • The covenant must not prohibit a physician from continuing to treat specific patients during the course of an acute illness, even after termination.
2. Buyout Requirement Clarified
   • The covenant must allow for a buyout in an amount not greater than the physician’s total annual salary and wages at the time of termination. This law replaces previous vague language, allowing for an arbitrator’s or court’s determination of what constitutes a “reasonable price.”
3. Time and Geographic Limitations
   • Non-competes must not exceed one-year post-termination.
   • They must be geographically limited to a five-mile radius from the physician’s primary practice location prior to termination.
4. Clarity in Contract Language
   • All terms and conditions must be “clearly and conspicuously” stated in writing.
5. Discharge Without Good Cause
   • Per Section 15.501, any physician non-compete is void and unenforceable if the physician is involuntarily discharged without “good cause,” which the law defines as a reasonable, conduct-related basis for termination directly tied to job performance or contract history.
6. Administrative Roles Excluded
   • The statute clarifies that “the practice of medicine” for non-compete purposes does not include administrative duties, such as managing or directing medical services for a medical practice or other health care provider.

Expansion to Other Healthcare Practitioners

Under the newly created Section 15.501, the statute now expressly applies to certain non-physician healthcare practitioners, including:

• Dentists (licensed by the Texas Board of Dental Examiners)
• Registered and vocational nurses (licensed under Chapter 301, Occupations Code)
• Physician assistants (licensed under Chapter 204).

For agreements entered into or renewed on or after September 1, 2025, non-competes with these practitioners are enforceable only if they:

• Provide for a buyout cap not exceeding the practitioner’s annual salary and wages at the time of termination;
• Are limited to one year in duration;
• Do not exceed a five-mile radius from the practitioner’s primary practice location; and
• Have terms clearly stated in writing.

However, unlike physicians, these practitioners do not receive the statutory protection for discharge without good cause.

Statutory Preemption of Other Law

Amended Section 15.52 confirms that the statutory enforceability criteria in Sections 15.50, 15.501, and15.51 are exclusive, preempting any conflicting authorities, either under Texas common law or other statutes, with respect to non-compete agreements.

Takeaways

With SB 1318, Texas joins a growing number of states refining non-compete rules in healthcare, emphasizing geographic and temporal limits, standardized buyouts, and transparency. These statutory changes bring greater clarity and conciseness to the enforceability of non-compete agreements across a broader segment of healthcare professionals in Texas. They also add patient-centered protections and codify important procedural safeguards for terminating physicians and practitioners.

As the September 1^st effective date approaches, healthcare employers and legal counsel should evaluate existing non-compete agreements for compliance with the revised statute, particularly in regard to buyout terms and discharge-related enforceability.

We will continue to monitor developments and provide updates as other states evaluate similar reforms.

For a comprehensive view of state-specific restrictions, Epstein Becker & Green, P.C. maintains a 50-State Health Care Supplement to its 50-State Non-Compete Survey, available here.

Ariana Tagavi, a Summer Associate (not admitted to the practice of law) in the firm’s New York office, contributed to the preparation of this post.