Texas Expands Restrictions on Noncompete Agreements for Health Care Professionals

Strategic Insights -

Texas Governor Greg Abbott signed Senate Bill 1318 (SB 1318) into law on June 20, 2025, which aims to further restrict noncompete agreements for health care professionals in the state. The new law takes effect on September 1, 2025, and limits the duration and scope of a noncompete to one year post-employment and five miles from the provider's primary practice site. This expansion includes restrictions previously only applicable to physicians, now extending to dentists, physician assistants, and nurses.

Key Takeaways:

  • SB 1318 amends Section 15.50(b) of the Texas Business and Commerce Code, expanding the scope of restrictions on noncompete agreements for health care professionals.
  • The new law limits the duration of a noncompete to one year post-employment and the geographic scope to five miles from the provider's primary practice site.
  • The required buyout provision must be "in an amount that is not greater than the physician's total annual salary and wages at the time of termination of the contract or employment."
  • A noncompete is void if a physician is involuntarily discharged without good cause, defined as a "reasonable basis for discharge of a physician from contract or employment that is directly related to the physician's conduct."
  • The term "nurse" now encompasses any person licensed under Chapter 301, Occupations Code, including registered nurses, licensed vocational nurses, and others.
  • Employers should work with counsel to ensure new noncompete agreements meet the revised standards, but existing agreements are not retroactive and do not need amendment.

Statistics:

  • September 1, 2025: The effective date of SB 1318.
  • 1 year: The maximum duration of a noncompete post-employment.
  • 5 miles: The maximum radius from the provider's primary practice site for a noncompete's geographic scope.
  • 100%: The maximum amount of the buyout provision, equal to the physician's total annual salary and wages at termination.
  • 20%: The proportion of health care professionals covered by SB 1318, including dentists, physician assistants, and nurses.

Sources:

  • Senate Bill 1318, 2025.
  • Texas Business and Commerce Code, Section 15.50(b).
  • Chapter 301, Occupations Code.