When a Texas federal court vacated the FTC’s proposed nationwide noncompete ban in August 2024, many employers exhaled. But as our colleagues wrote last December, the FTC’s interest in noncompetes did not disappear with its rulemaking authority; the agency simply reoriented toward case-by-case enforcement. We have written separately about how that enforcement campaign has evolved, and why filing a noncompete lawsuit may now invite federal scrutiny of an employer’s entire noncompete program.
This post focuses on a different dimension of the same story: the accelerating state legislative response. The result is a thickening patchwork of laws that, for multi-state healthcare employers in particular, has made noncompete compliance more complex—and more consequential—than at any point in recent memory.
The Scale of Change
At least twelve states have enacted healthcare-specific noncompete legislation since the August 2024 Texas court ruling. Our colleagues’ December 2025 post catalogued the first wave of that activity, covering eight states through early 2025. This post picks up where that survey left off.
The 2026 Class: Complete Bans and Partial Restrictions
Complete Bans
Virginia enacted the most comprehensive package of any state in 2026, signing three separate noncompete bills into law in May, all effective July 1, 2026.
Senate Bill 128 and its companion House Bill 627 categorically bar healthcare systems from imposing noncompetes on licensed healthcare professionals—physicians, nurses (RN and LPN), advanced-practice registered nurses, licensed counselors, social workers, optometrists, and psychologists, among others—with a civil penalty of $10,000 per violation. Three narrow categories of arrangements remain permissible: (i) sale-of-business restrictions reasonable in scope and duration; (ii) training-repayment provisions for professionals employed fewer than five years; and (iii) customer non-solicitation provisions limited to clients with whom the professional had material contact. The prohibition applies to contracts entered into or renewed on or after July 1, 2026.
Senate Bill 170 applies more broadly—to all employers and employees, not just healthcare—and renders any noncompete unenforceable if the employer discharges the employee without cause and without severance benefits, unless that severance commitment was disclosed at the time the covenant was signed. After-the-fact arrangements cannot cure the deficiency. Virginia healthcare employers therefore face a dual compliance obligation: the categorical ban under SB 128/HB 627 for licensed professionals, and the severance-on-discharge requirement under SB 170 for all other noncompete-bound employees.
Utah House Bill 270, enacted in March 2026 and effective May 6, 2026, establishes a broad ban on post-employment noncompetes for licensed healthcare workers, including veterinarians, without limitation to any particular wage threshold or specialty.
Partial Restrictions
Tennessee House Bill 1034, effective July 1, 2026, bars noncompetes entirely for employees earning less than $70,000 in annualized compensation and creates a rebuttable presumption of reasonableness for restrictions of two years or less. Confidentiality agreements, customer non-solicitation provisions, and employee non-solicitation provisions remain expressly permissible. Tennessee’s approach is more permissive than Virginia’s or Utah’s, but it eliminates noncompetes for a significant segment of the healthcare workforce given the mandatory salary floor.
Why Healthcare? The Policy Drivers
Two concerns animate virtually all of this legislation. The first is patient choice and continuity of care: when a physician or nurse leaves a healthcare system and a noncompete prevents them from practicing nearby, patients—especially in rural areas already facing provider shortages—may lose access to care entirely, not merely a preferred provider. The second is healthcare market consolidation, which has progressively reduced the practical alternatives available to departing physicians and nurses, making the bite of noncompete clauses more pronounced than in earlier decades when independent practice was a more viable option.
Practical Steps for Employers
For multi-state healthcare employers, the compliance challenge is no longer just federal enforcement risk—it is a landscape in which the rules, and the consequences of getting them wrong, differ materially from state to state. A single form noncompete applied uniformly across Virginia, Utah, and Tennessee is almost certainly non-compliant in at least one jurisdiction. Employers should take the following steps now:
- Audit existing agreements. The bans imposed by Virginia and Utah apply to agreements entered into on or after July 1 and May 6, 2026 respectively. Any post-effective-date noncompete purporting to bind a covered healthcare professional in those states is void.
- Address Virginia’s severance-on-discharge rule proactively. For any Virginia employee—not just healthcare professionals—whose noncompete was not accompanied by a disclosed severance commitment at signing, the covenant may be unenforceable upon a no-cause discharge.
- Apply Tennessee’s $70,000 compensation floor carefully. For hourly workers, annualized compensation is calculated at 40 hours per week, 52 weeks per year. Many healthcare workers in hourly roles will fall below the threshold.
- Evaluate non-solicitation and training-repayment alternatives. Both are expressly preserved under Virginia’s new laws and can protect meaningful employer interests—patient relationships and recruitment investments—without the escalating legal and regulatory risks that post-employment noncompetes now carry.
- Factor in the federal enforcement overlay. A multi-state healthcare employer whose noncompete program is aggressive enough to attract state-law challenges may also attract FTC scrutiny. The agency has identified the public record of state-court noncompete litigation as a direct source of enforcement leads.
Conclusion
The failure of the FTC’s nationwide noncompete rule did not slow state legislative activity. For multi-state healthcare employers, the cumulative result of the 2025–2026 legislative cycle is a compliance environment that demands state-by-state analysis of every noncompete in the workforce and a candid assessment of whether the interests those agreements protect can be served through less legally exposed instruments.
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.
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