Texas Updates Physician Noncompete Provisions

Strategic Insights -

In a recent move, the Texas government has modified the existing non-compete provisions for physicians and some healthcare professionals. The law, SB 1318, aims to restrict practicing medicine in a certain geographic area after leaving a contract or employment. Practitioners will need to abide by specific buyout requirements, time limitations, and geographic limitations.

Key Takeaways:

  • The new law, SB 1318, introduces material changes to non-compete provisions for physicians, including new buyout requirements, time limitations, and geographic limitations.
  • Buyout requirements for physicians will be based on one year of their annual salary and wages at the time of employment or contract termination, replacing the previous "reasonable price" test.
  • Time limitations will require post-employment covenants not to compete to be limited to no longer than one year after contract or employment termination.
  • Geographic limitations will be restricted to a five-mile radius from the location where the physician primarily practiced before contract or employment termination.
  • The statute updates the buyout requirement, time limitations, and geographic limitations for dentists, certain nurses, and physician assistants, which are similar but not identical to those for physicians.
  • Involuntary discharge without good cause renders covenants not to compete for physicians void and unenforceable.

Statistics:

  • The new law is set to take effect on September 1, 2025.
  • Employers will need to modify existing non-compete agreements and renewals to comply with the new law.
  • Practitioners will be limited to a five-mile radius when practicing medicine post-employment.
  • The buyout amount will be equivalent to one year of the practitioner's annual salary and wages at the time of employment or contract termination.

Sources:

  • Tex. Bus. & Com. Code SS15.50, et seq
  • SB 1318 (Texas Statute Assembly)