Texas Governor Greg Abbott signed SB 1318 on June 20, 2025, amending the Texas Business & Commerce Code Sections 15.50, 15.51, and 15.52, and adding Section 15.501. These changes narrow the scope of enforceable non-competes in the Texas healthcare market in favor of physicians, dentists, nurses (including advanced nurse practitioners), and physician assistants.

Prior to SB 1318, Texas laws only addressed non-compete restrictions applicable to physicians (other providers excluded), and the language provided broad flexibility regarding buyout amounts and was silent as to the limitations of geography and duration, as long as such terms were “reasonable.”

Beginning in September of 2025, non-competes signed on or after September 1, 2025 must: (i) restrict buyout amounts to the total annual salary and wages at the time of termination, (ii) limit the duration of a non-compete to one year, (iii) limit the geographic radius of the non-compete to a five-mile radius from the primary practice location, and (iv) must be clearly stated in writing.  Non-compete covenants cannot restrict physicians from their management of medical services in an administrative capacity.

Furthermore, non-competes are no longer enforceable when physicians are terminated without good reason.  Importantly, such restriction does not extend to dentists, nurses, and physician assistants.

SB 1318 takes effect on September 1, 2025 and will be applicable to non-compete covenants entered into or renewed on or after such effective date.  Non-compete covenants entered into or renewed prior to September 1, 2025 will continue to be governed by the former law.

The changes implemented by SB 1318 narrow the scope of enforceable non-competes in the Texas healthcare market in favor of practitioners.  Practitioners will now be better positioned to move freely within their preferred markets, especially in situations of wrongful termination.