Five Key Changes to Physician Non-Compete Agreements in Texas

Texas Senate Bill 1318 came into effect on September 1, 2025, and reformed Texas law on non-compete agreements to provide greater protections for physicians and other healthcare practitioners. There are five key changes to physician non-compete agreements that the new legislation requires for such covenants to be enforceable:

1. Buyout cap
   The covenant must allow the physician to buyout of the covenant for an amount not greater than the physician’s total annual salary and wages at the time the contract or employment is terminated.
2. Time limitation
   The covenant must expire no later than one year after the date the contract or employment was terminated.
3. Geographic limitation
   The geographical area subject to the covenant must be limited to no more than a five-mile radius from the location at which the physician primarily practiced before the contract or employment was terminated.
4. Clear writing
   The covenant must have terms and conditions clearly and conspicuously stated in writing.
5. Good cause required
   A covenant not to compete relating to the practice of medicine is void and unenforceable if the physician is involuntarily discharged from their contract or employment without good cause. “Good cause” is defined as “a reasonable basis for discharge of a physician from contract or employment 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.”

Conclusion

SB 1318 affords more protection for physicians by placing additional requirements for physician non-compete agreements to be enforced in Texas. Physicians should be aware of these recent changes and review any non-compete agreements made after the effective date. Further, employers of physicians and other healthcare providers should review their employment agreements and make any necessary changes to comply with the amendments and ensure any non-compete provisions are enforceable.