New Non-Compete Law for Healthcare Professionals in Texas in Effect in 2025

On June 20, 2025, Texas Governor Greg Abbott signed Senate Bill 1318 (SB 1318), which tightens the rules for noncompete agreements in the healthcare sector. The law becomes effective September 1, 2025.

SB 1318 brings major changes to noncompete restrictions in Texas. It expands the application of stricter noncompete restrictions (once largely reserved for physicians) to a broader group of health care practitioners, imposes hard caps on duration and geography, and changes how buyouts, terminations, and clarity requirements must be handled.

If you are in Texas and dealing with a noncompete in health care—whether as a physician, nurse, dentist, physician assistant, or an employer—you need to understand the new landscape. Hiring a Texas noncompete attorney who specializes in health care or employment law will be crucial. Below is a detailed breakdown.

Key Changes under SB 1318

Change	What SB 1318 Requires	Importance / Impact
Applies to More Healthcare Professions	The stricter rules, once limited to physicians only, now also cover nurses, dentists, and physician assistants when it comes to their professional practice.	Roles that previously fell outside the “physician-only” regime may now face more constraint. Employers and practitioners must review whether their noncompetes now fall under the new rules.
One-year maximum term	The noncompete restriction cannot extend beyond one year after termination or contract end.	Previously, duration was judged by a “reasonable under the circumstances” standard, which could allow for longer periods in some cases. This caps that flexibility.
Five-mile geographic limit	The restricted area must be within a 5-mile radius of the practitioner’s “primary practice” location prior to termination.	Texas courts historically allowed much more flexible geographic analysis (e.g. considering rural vs. urban, patient travel areas). This change significantly narrows what is presumptively acceptable for HCP noncompetes.
Mandatory buyout option with limit	The noncompete must include a buyout option, and that buyout cannot exceed the HCP’s annual salary and wages at the time of termination.	Before, the statute allowed a “reasonable price” standard and arbitrator resolution for disputes. Now, the cap and the removal of arbitration for buyout disputes (unless a general arbitration clause already exists) makes buyout terms more uniform and constricted.
Clear & conspicuous writing	The covenant must state its terms clearly and conspicuously in writing so the HCP can understand the post-termination obligations.	Increases transparency and can serve as a basis for challenges if an agreement is ambiguous or hidden.
Void if involuntarily terminated without “good cause” (for physicians)	For physician noncompetes, if the employer terminates involuntarily without good cause, the noncompete becomes void. The statute provides a definition for “good cause” (e.g. conduct, job performance, contract record) tied to reasonableness.	This is a major protection for physicians: it means even a well-drafted covenant may fail if the termination lacks a lawful basis under the statute.
Administrative roles excluded	The stricter provisions do not apply to noncompetes around administrative or managerial medical services (e.g. medical director roles). Those remain under the traditional reasonableness standard.	This helps carve out a path for practices to continue enforcing noncompetes on administrative or nonclinical roles under more flexible standards.
Patient-access provisions remain	SB 1318 keeps existing rules requiring physicians, upon termination, to be able to receive certain patient lists, access to medical records, patient continuity care during acute illness, etc.	These protections for patients are preserved, meaning noncompetes cannot block necessary patient care functions.

What Doesn’t Change or Is Ambiguous

• Grandfathering of older agreements — Agreements entered prior to September 1, 2025, will remain subject to pre-SB 1318 rules, unless they are renewed after that date.
• Ambiguity around non-solicitation covenants — SB 1318 refers to “covenant not to compete,” but we can expect litigation over whether these requirements also apply to covenants not to solicit.
• Calculation questions — The statute doesn’t expressly clarify how to calculate the salary cap for those with partial years, commission, productivity-based compensation, or blended pay models, so we can expect disputes over how the buyout amount should be calculated.
• Judicial influence on existing agreements — Though SB 1318 doesn’t directly change already existing agreements (unless renewed), courts may nevertheless be influenced by the new statutory framework when interpreting or reforming older covenants.

Practical Implications: Why This Matters for Texas Health Care Noncompete Disputes

For Health Care Practitioners (Physicians, Nurses, Dentists, PAs)

• Negotiate tighter limits now
  If you’re negotiating a new covenant or renewal, push for the shortest duration possible, narrow geography (especially if 5 miles is excessive for your practice), clear carve-outs, and a fair buyout that doesn’t exceed the capped amount.
• Challenge poorly drafted or ambiguous agreements
  Especially under the new law, ambiguity in the agreement’s language or lack of conspicuousness may be a basis for invalidating or limiting enforcement.
• For physicians, scrutinize your termination terms
  If your employer terminates you involuntarily without “good cause,” your covenant may become void under SB 1318—something that would not necessarily have been possible under older law.

For Health Care Employers / Medical Practices

• Revise contract templates now
  All physician, dentist, nurse, and physician assistant employment and contractor agreements (or noncompete addenda) should be updated to comply with SB 1318. Focus on term, geography, buyout, clarity, and definitions of “good cause,” among others.
• Segment nonclinical vs. clinical obligations
  To avoid invalidating the entire restrictive covenant, consider bifurcating noncompete clauses: one part covering clinical practice subject to SB 1318 limits, and another for nonclinical, administrative, or operational restrictions governed by traditional reasonableness standards.
• Clarify primary practice location
  For practitioners who work at multiple sites, designating and documenting a “primary practice location” is essential to avoid disputes over what constitutes the 5-mile radius.
• Careful drafting around buyout clauses
  Ensure buyouts do not exceed the capped amount, and avoid clauses that force arbitration of buyout disputes unless the contract already contains a general arbitration clause.
• Mind renewal mechanics
  If your contracts renew automatically or annually, you may inadvertently convert old agreements into new ones subject to SB 1318. Review renewal language and consider extended fixed-term agreements executed prior to the effective date.
• Prepare for potential litigation over ambiguous terms
  Given uncertainties (e.g., compensation models, calculation of salary in partial year cases), counsel will likely be needed to anticipate and defend enforcement efforts in court or arbitration.

Why Hire a Texas Noncompete Attorney (Especially in Health Care)

• Expert understanding of SB 1318
  An attorney experienced in Texas healthcare and noncompete law will know how to craft or critique covenants that comply with SB 1318’s new requirements and avoid pitfalls.
• Tailored risk assessment
  Cases that look safe today may look quite risky under the new regime. An attorney can analyze your role, location, compensation structure, and covenants to identify vulnerabilities.
• Litigation planning and defense
  If a dispute arises (e.g. employer sues under a noncompliance covenant, or a practitioner challenges the covenant), having counsel versed both in restrictive covenant litigation and health care specialty is crucial.
• Drafting and renegotiation guidance
  Whether you’re entering, renewing, or modifying an agreement, an attorney can help negotiate carve-outs, geographic limits, termination definitions, buyout structuring, and clarity in drafting.
• Judicial precedent tracking
  Because SB 1318 is new, cases will evolve over time. A good attorney will monitor relevant judicial decisions and adjust strategies as courts interpret the law.
• Compliance audits and internal strategy
  For health practices with multiple providers, counsel can perform internal audits, suggest which agreements to reform (or bifurcate), and help train HR or practice leadership on compliant policy.

Facing a Non-Compete as a Physician in Texas?

Our firm represents physicians across Texas in challenging unfair and overly restrictive non-compete agreements. If your ability to serve patients and maintain your career is being limited, you may have legal defenses under Texas contract law, Texas Business & Commerce Code, and federal antitrust statutes. Call us today for a confidential consultation to discuss your options and protect both your practice and your patients.

Leiza Dolghih is the founder of Dolghih Law Group PLLC.  She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at leiza@dlg-legal.com or (214) 531-2403.