New Texas Law Limits Health Care Provider Noncompetes

In the biennial session that ended on June 2, the Texas Legislature passed a bill (SB 1318) limiting the terms of noncompete agreements applicable to health care professionals such as physicians, dentists, and mid-level practitioners. Gov. Greg Abbott signed the legislation on June 20.

The legislation modifies Section 15.50(b) of the Texas Business & Commerce Code, which has historically placed certain limits on physician noncompetes. The new provisions add further limitations, including:

• A maximum duration of one year following termination of the contract or employment;
• A maximum geographic scope of five miles;
• Unenforceability if physicians are terminated without cause; and
• A buyout option limited to one year's salary or wages.

The law further adds a new Section 15.501, which adds equivalent protections for dentists, nurse practitioners, and physician assistants.

While Texas law previously placed limits on physician noncompetes, there were no limits on the duration or area of the agreements, and buyouts were limited to a "reasonable price." Furthermore, no similar law applied to dentists or mid-level practitioners.

This new law is part of other efforts meant to protect physicians against concerns of too much control by other market participants.

Having been signed by the governor, the law takes effect on Sept. 1, 2025. This date is crucial because noncompetes entered into before that date are not required to be amended (as was the case with a recent federal proposal on noncompetes), nor are limits on enforceability applied retroactively.