Texas recently enacted a law that broadens the geographic and temporal restrictions on noncompete agreements with healthcare practitioners. The law will apply to physicians, nurses, physician assistants, and dentists.
Quick Hits
- A new law in Texas imposes additional geographic and temporal limitations on noncompete agreements with healthcare practitioners in the state.
- The law extends the noncompete restrictions to dentists, nurses, and physician assistants.
- The law will take effect on September 1, 2025.
On June 20, 2025, Texas Governor Greg Abbott signed into law Senate Bill No. 1318, a measure that limits noncompete agreements with healthcare practitioners to one year and a five-mile radius from the location at which the healthcare practitioner primarily practiced.
While previousnoncompete restrictions applied only to physicians, the new law applies to dentists, nurses, and physician assistants. The terms and conditions of the noncompete agreement must be stated clearly and conspicuously in writing.
Buyout provisions, which permit physicians to pay to be released from noncompete agreements, are capped at the physician's annual salary at the time of employment termination. This replaces the previous "reasonable price" standard and eliminates the option for arbitration to determine the buyout amount.
Under the law, if a physician's employment is terminated without good cause (i.e., without a reasonable basis related to the physician's conduct, job performance, or contract record), the noncompete becomes void.
Lawmakers in Colorado and Oregon recently approved similar legislation on noncompete agreements.
Next Steps
Employers in the healthcare industry in Texas may wish to review and update their noncompete agreements before the new law takes effect on September 1, 2025. Noncompete agreements with doctors, nurses, physician assistants, and dentists will be considered invalid if they go beyond one year or beyond a five-mile radius from the location at which the healthcare practitioner primarily practiced before the contract or employment terminated.
Employers may wish to clearly list the primary practice location in contracts to prevent disputes over the five-mile radius restriction and carefully document the reasons for terminating the employment of covered healthcare practitioners, indicating when a termination was for good cause.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
