On June 20, 2025, Governor Greg Abbott signed Senate Bill 1318 (“SB 1318”), significantly tightening Texas’s restrictions on non-compete agreements in the healthcare sector. These amendments, effective September 1, 2025, apply sweeping new requirements to physicians, nurses, physician assistants, and dentists (collectively, “healthcare practitioners” or “HCPs”).
With SB 1318, Texas joins a growing wave of states reassessing the use of restrictive covenants in healthcare, following the FTC’s failed federal non-compete ban and growing public concern over access to care and workforce mobility.
Key Takeaways from SB 1318
- Expanded Applicability
Historically, Texas’s “Additional Non-Compete Requirements” applied only to physicians. SB 1318 now extends these requirements to:
- Licensed physicians
- Dentists
- Registered and vocational nurses
- Physician assistants
- New Statutory Requirements for HCPs (Effective Sept. 1, 2025):
- Maximum One-Year Duration: Post-employment restrictions cannot exceed one year.
- Geographic Limit: The restriction must be limited to a five-mile radius from the practitioner’s primary work location.
- Buyout Right: The agreement must offer a buyout clause capped at one year of the practitioner’s salary and wages at the time of termination.
- Written Disclosure: The non-compete must be clearly and conspicuously stated in writing.
These requirements apply to any non-compete agreements entered into or renewed on or after Sept. 1, 2025.
Key Changes for Physicians
- Void If No “Good Cause”: A non-compete is void if a physician is terminated without good cause. The law defines “good cause” as a reasonable basis related to the physician’s performance, conduct, or employment record.
- Administrative Carve-Out: Non-competes tied to administrative roles (e.g., medical directorships) are excluded from these new physician-specific rules and instead remain subject to the general “reasonableness” standard. The practice of medicine does not include managing or directing medical services in an administrative capacity.
- Patient Access Provisions Remain: Physicians must still be allowed to:
- Access a list of patients seen within the past year
- Obtain patient medical records (with authorization)
- Treat patients with acute illness post-termination
Strategic Implications for Employers
- Assess Scope of Impact
SB 1318 affects non-competes involving clinical practice. Non-competes related solely to business operations, equity interests, or non-clinical services may not be subject to the new law—but courts may still look to SB 1318 for guidance. - Review and Update Contracts
Now is the time to:
- Review all physician, PA, nurse, and dentist agreements
- Define and document “good cause” termination standards
- Identify which agreements may be up for renewal after Sept. 1, 2025
- Revise templates to ensure compliance with SB 1318
- Monitor Buyout Calculations
The capped buyout formula may not be straightforward for:
- New hires employed less than a year
- Providers with RVU-based or commission structures
Employers should prepare to review and document compensation policies carefully to ensure compliance under the new law.
- Consider Separating Clinical and Non-Clinical Covenants
To preserve enforceability, employers may wish to separate non-competes tied to clinical services from those addressing administrative duties, equity ownership, or marketing functions. - Update Policies and Training
HR, legal, and compliance departments should be trained on SB 1318. Consider implementing:
- Policy updates
- Manager training
- Revised onboarding procedures for new hires
Why This Matters
SB 1318 is a significant shift in Texas employment law, with major implications for how healthcare organizations hire, retain, and contract with licensed professionals. It adds clarity, but also new complexity, especially around geographic limits and compensation-based buyouts. Employers and healthcare providers should begin compliance planning immediately.
At Lengea Law, we help healthcare businesses of all sizes navigate employment law, including structuring enforceable and fair non-competes. If your organization employs licensed professionals in Texas or across multiple states, now is the time to assess whether your agreements align with the changing legal landscape.
Need Help?
Contact us today to:
- Audit your current non-compete agreements
- Update your contracts before the September 1, 2025 deadline
- Build a compliance plan tailored to your clinical and business model
Disclaimer: This blog post is for informational purposes only and does not constitute legal advice