Key Updates Employers and Healthcare Professionals Should Know
There’s been a lot of national noise around non-compete agreements lately, so it’s a fair question to ask: Has Texas non-compete law actually changed?
The short answer is yes — but narrowly. Texas has not banned non-competes across the board. Instead, lawmakers enacted targeted reforms focused on healthcare professionals, significantly tightening what’s allowed in that space beginning in 2025.
Here’s what’s new, what’s not, and why it matters.
The Big Update: Senate Bill 1318 (Effective September 1, 2025)
In June 2025, Texas enacted Senate Bill 1318, which amends the Texas Covenants Not to Compete Act (Texas Business & Commerce Code §15.50 et seq.). The law creates a new framework specifically governing non-compete agreements for licensed healthcare practitioners.
Importantly: these changes apply to non-competes entered into or renewed on or after September 1, 2025. Existing agreements are generally grandfathered under prior law.
Who Is Affected?
Previously, Texas imposed special statutory rules primarily on physicians. SB 1318 expands those restrictions to include a broader group of licensed healthcare professionals, including:
- Physicians
- Dentists
- Physician Assistants
- Professional and Vocational Nurses
For employers in healthcare, this is a meaningful expansion — and one that requires careful contract review going forward.
What Are the New Limits?
Under SB 1318, non-compete agreements for covered healthcare practitioners must meet specific statutory caps, replacing the traditional “reasonableness” analysis in several areas.
- Maximum Duration: One Year
Healthcare non-competes may not exceed one year after termination of employment or engagement.
- Geographic Scope: Five-Mile Radius
The restricted area must be limited to no more than five miles from the practitioner’s primary practice location at the time the relationship ends.
- Buyout Cap
If the agreement includes a buyout option, the buyout amount is capped at the practitioner’s total annual salary and wages at termination — eliminating open-ended “reasonable” buyout formulas.
- Additional Physician Protection
For physicians specifically, a non-compete is void if the physician is involuntarily terminated without good cause, as defined in the statute.
- Clear and Conspicuous Writing
The statute reinforces that non-competes must be clearly and conspicuously stated to be enforceable.
What Has Not Changed
Despite the headlines:
- Texas still generally enforces non-compete agreements outside of healthcare, provided they are ancillary to an enforceable agreement and reasonable in scope, geography, and duration.
- There is no statewide ban on non-competes for most employees.
- The FTC’s proposed nationwide non-compete ban has not taken effect and does not override Texas law.
In other words, this is not a wholesale shift in Texas’ employer-friendly approach — it’s a targeted policy choice focused on healthcare mobility and patient access.
Why This Matters
For healthcare employers, these changes mean:
- Employment agreements must be re-drafted to comply with hard statutory caps.
- Legacy non-compete templates may no longer work after September 1, 2025.
- Retention strategies may need to rely more on compensation, culture, and long-term incentives — not just restrictive covenants.
For healthcare professionals, the law provides:
- Greater predictability and mobility
- Clear limits on how long and how far a non-compete can restrict future practice
- More leverage in contract negotiations
Bottom Line
Texas hasn’t abandoned non-compete enforcement — but for healthcare practitioners, the rules are now far more precise and far less flexible.
If you’re negotiating, drafting, or renewing healthcare employment agreements in Texas, now is the time to review them before the new law takes effect.
Sources
- Texas Senate Bill 1318 (2025 Regular Session), amending Tex. Bus. & Com. Code §§15.50–15.51
- Texas Covenants Not to Compete Act
- McGuireWoods LLP, Texas Further Restricts Healthcare Non-Compete Agreements (2025)
- Bracewell LLP, Texas SB 1318: Changes to Healthcare Non-Competes (2025)
- Alston & Bird LLP, Texas Changes Health Care Noncompetes (2025)