Texas has enacted a new law that significantly alters the enforceability of non-compete agreements for health care professionals. Senate Bill 1318, signed into law by Governor Greg Abbott on June 20, 2025, introduces new statutory restrictions that apply to non-compete agreements entered into or renewed on or after September 1, 2025. Existing covenants not to compete prior to September 1, 2025 are not subject to the new law (at least until the covenant is renewed or a new one is entered). This legislation supplements, but does not replace, existing law.
Who’s Covered and Who’s Not Under SB 1318
Physicians in Texas remain subject to Section 15.50(b) of the Texas Business and Commerce Code, which requires specific conditions for a non-compete to be enforceable, including a mandatory buyout clause. SB 1318 creates a new Section 15.501, which applies to dentists, nurses (including APRNs, RNs, and LVNs), and physician assistants. This new section imposes similar, but not identical, restrictions and does not include all the protections afforded to physicians.
- Section 15.50(b) continues to apply exclusively to physicians.
- While, Section 15.501 now extends non-compete regulation to dentists, nurses (APRNs, RNs, LVNs), and physician assistants (PAs).
- Neither statute covers podiatrists, non-clinical administrators, and individuals in purely administrative or leadership roles.
SB 1318 Requirements and Restrictions
Senate Bill 1318 imposes several key restrictions on non-compete agreements for covered health care professionals. Below is a breakdown of the provisions and their applicability.
Geographic Limitations
Non-compete agreements may not restrict a provider from practicing beyond a five-mile radius from their primary practice location at the time of termination.
- Applies to: Physicians (under §15.50(b)) and Dentists, nurses, and physician assistants (under §15.501).
- Definition of Primary Practice Location: The statute does not define primary practice location. Consequently, it becomes critical to explicitly define the primary practice location in the non-compete agreement.
Duration of Restriction
The duration of a non-compete may not exceed one year following the termination of employment or contract.
- Applies to: Physicians (under §15.50(b)) and Dentists, nurses, and physician assistants (under §15.501).
- Note: This creates a uniform temporal limit across both statutes.
Buyout Clause
Under both §15.50(b) and the new §15.501, non-compete agreements must include a buyout clause to be enforceable.
- Applies to: Physicians (under §15.50(b)) and Dentists, nurses, and physician assistants (under §15.501).
- Implication: A non-compete agreement for one of these professionals that does not include a buyout clause is unenforceable by law.
Buyout Caps
If a buyout clause is included in a non-compete agreement, the amount must not exceed the provider’s total annual salary and wages at the time of termination.
- Applies to: Physicians (under §15.50(b)) and Dentists, nurses, and physician assistants (under §15.501).
- Note: The purpose of the cap is to prevent excessive financial barriers to job mobility.
Clarity of Terms
All non-compete provisions must be clearly stated in writing.
- Applies to: Physicians (under §15.50(b)) and Dentists, nurses, and physician assistants (under §15.501).
- Note: Agreements with ambiguous or hidden terms may render the agreement unenforceable.
Automatic Voiding Upon Termination Without Good Cause
If a physician is involuntarily terminated without good cause, the non-compete is automatically void.
- Applies to: This provision applies to physicians, and does not extend to dentists, nurses, or physician assistants (under §15.50(b)).
- Definition of Good Cause: Good Cause is defined as a reasonable basis for discharge related to the physician’s conduct, including violations of employer policies, patient care standards, or applicable laws.
Patient Care Protections Under SB 1318
SB 1318 includes safeguards to ensure continuity of care for patients, particularly when a provider leaves a practices. If a physician is terminated, they must be allowed to continue treating patients with acute illnesses and maintain access to patient lists and records for patients seen in the year prior to termination. These protections, however, are not explicitly extended to dentists, nurses, or physician assistants under SB 1318.
SB 1318 Implications for Employers and Health Care Professionals
Employers
Employers should take immediate steps to review and revise their non-compete agreements to ensure compliance of non-competes entered into or renewing after September 1, 2025 with both §15.50(b) and the new §15.501. The agreements should include the following considerations:
- Ensuring geographic and temporal scopes are within statutory limits
- Including buyout clauses (and capping them appropriately)
- Using clear, unambiguous language
- Recognizing that failure to comply may render the agreement unenforceable
Health Care Professionals
The updates to the law not only impact employers, but health care professionals as well. SB 1318 enhances job mobility and reduces financial burdens for many health care professionals such as:
- Greater freedom to change employers within a reasonable geographic area
- Protection from excessive buyout demands
- For physicians, additional safeguards in the event of termination without cause
To fully understand the impact of SB 1318, it is important to consider how the law reshapes the responsibilities for employers and expands protections for health care professionals alike.
Contact ByrdAdatto for Guidance on Non-Compete Agreements in Texas
SB 1318 reflects a growing national trend toward limiting the use of non-compete agreements in health care. The law seeks to balance the interests of employers with the rights of health care professionals and the needs of patients. By establishing clear, enforceable standards, Texas aims to promote fairness, mobility, and access to care across its health care system.
If you are a health care provider or employer with questions about how SB 1318 may impact your contracts, our legal team is here to guide you through the changes. Contact ByrdAdatto to review your current agreements, and ensure your practice remains compliant in this evolving legal landscape.
