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Texas has enacted Senate Bill (SB) 1318, which amends Texas’s Business and Commerce Code and makes key changes to noncompete provisions against physicians and other licensed providers. The bill, signed by Texas Governor Greg Abbott on June 20, 2025, will take effect on September 1, 2025. SB 1318 expands current noncompete restrictions set forth under Section 15.50 of the Texas Business and Commerce Code and extends the statute’s application to other healthcare practitioners, including dentists, nurses, and physician assistants. The revisions to Section 15.50 and (new) Section 15.501 will apply to agreements “entered into” or “renewed” on or after September 1, 2025.

Key takeaways

SB 1318’s changes impose stricter limitations on noncompete covenants as applied to physicians and will extend such limitations to other healthcare practitioners. The changes include:

• Buyout. The bill revises Section 15.50’s buyout requirement such that the buyout option cannot exceed the physician’s total annual salary and wages at the time of contract termination. This is a departure from current language allowing for a buyout at a “reasonable” amount, upon agreement by the parties, or as determined by a court-appointed arbitrator.
• Duration. The bill adds a provision requiring that a noncompete covenant expire within one year of the termination of the contract or employment.
• Geographical scope. The bill limits the geographical scope of noncompete covenants to a five-mile radius from the location where the physician primarily practiced before the termination of the contract or employment.
• Terms. The bill requires terms and conditions to be clearly and conspicuously stated in writing.
• Unenforceable against involuntarily discharged physicians. The noncompete will be void and unenforceable against any physician licensed by the Texas Medical Board who is involuntarily discharged from their contract or employment without good cause. For purposes of this provision, “good cause” means a reasonable basis for discharge of a physician that is directly related to the physician’s conduct, including the physician’s conduct on the job or otherwise, job performance, and contract or employment record.
• Expansion to other practitioners. The bill extends the noncompete restrictions to other healthcare practitioners, including dentists, professional or vocational nurses, and physician assistants.
• Exclusion for administrative services. The bill expressly excludes the management or direction of medical services in an administrative capacity from the noncompete requirements.

Physicians and healthcare entities should be aware of these changes and plan accordingly. The modifications to buyout provisions, geographical limitations, and duration of covenants may impact contract negotiations and employment agreements.

For more information about SB 1318 and its potential impact on physician agreements, contact one of the authors of this article or any other member of McDermott’s Health & Life Sciences Practice Group.