Texas Tightens Non-Compete Laws for Healthcare Professionals: Is Your Practice Ready?
In a major shift for the healthcare employment landscape, last week Texas passed new legislation that significantly restricts the use of non-compete agreements for healthcare professionals. On June 20, 2025, Governor Greg Abbott signed Senate Bill 1318 (SB 1318) into law, amending the state’s Covenants Not to Compete Act.
SB 1318 no longer limits strict non-compete rules to physicians. Starting September 1, 2025, the same heightened requirements will apply to nurses, dentists, and physician assistants. To remain enforceable, non-compete agreements must be limited to one year in duration and no more than a five-mile radius from the healthcare professional’s primary place of practice. Each agreement must also include a clearly stated buyout clause, with the buyout amount capped at one year of the provider’s salary at the time of termination. Employers must also ensure the terms of the agreement are clearly and conspicuously stated in writing to avoid ambiguity or enforceability challenges.
For physicians, the law introduces additional provisions. You must now ensure that non-compete agreements include a clause voiding the restriction if the physician is involuntarily terminated without good cause. At the same time, you may continue to use non-compete agreements for administrative roles, such as medical directors, but these will remain subject to existing standards of reasonableness rather than the new, more restrictive SB 1318 framework. The law also retains all prior patient-access protections, which means your agreements must still allow departing physicians to access patient lists, obtain authorized copies of medical records, and continue treating patients with acute illnesses post-termination to preserve continuity of care.
With these changes approaching, now is the time to take action. You should begin by auditing all current employment and contractor agreements to identify which ones will need updates. Pay special attention to auto-renewing contracts, as any agreement renewed on or after September 1, 2025, must meet the new legal standards. If you want to preserve your existing terms, consider renewing or extending contracts before the effective date. Otherwise, begin revising your agreements now to ensure compliance.
It is also essential to update your employment templates for physicians, nurses, dentists, and PAs to reflect the new limitations. If your contracts currently combine clinical and administrative duties in a single non-compete clause, consider separating them. Doing so helps you apply SB 1318 restrictions only where required while preserving flexibility for non-clinical or ownership-related provisions.
Texas is joining a growing national trend aimed at reducing overly restrictive employment covenants in healthcare. By acting now, you can position your practice to remain compliant, competitive, and aligned with evolving workforce expectations. SB 1318 is not just a legal update, it’s an opportunity to modernize your employment strategy and protect both your practice and your patients’ access to care.
If you have any questions about SB 1318 or how it impacts your healthcare agreements, I’m here to help you navigate these changes and develop a tailored strategy for your organization. Contact me with employment law questions at renee@engagelawchicago.com.
