SB 1318: Texas’s Seismic Shift in Non-Compete Law for Physicians, Nurses, and Other Healthcare Professionals

A landmark piece of legislation is set to fundamentally reshape the professional landscape for physicians, nurses, dentists, and physician assistants across Texas. On June 20, 2025, Governor Greg Abbott signed Senate Bill 1318 (SB 1318) into law, marking not a minor adjustment but a seismic shift in how non-compete agreements are structured and enforced in the state’s healthcare sector. This new law, which went into effect on September 1, 2025, creates a clear, rigid, and predictable framework that replaces a decades-old system of vague “reasonableness” standards that often led to costly and uncertain litigation. It is critical to understand that the law is not retroactive; it applies only to covenants not to compete that are entered into or renewed on or after September 1, 2025. Existing agreements remain governed by the prior law unless they are renewed, at which point they will fall under the new, stricter regime. This legislative action places Texas within a broader national trend of states moving to curtail or eliminate restrictive employment covenants in healthcare, recognizing the potential for such agreements to limit practitioner mobility and impact patient access to care. However, rather than imposing an outright ban, the Texas Legislature opted for a compromise. SB 1318 establishes a series of clear “guardrails”—unambiguous limits on geography, duration, and buyout costs—designed to balance the legitimate business interests of employers with the professional freedom of practitioners and the continuity of patient care. By preempting the old common law standards, the statute aims to reduce legal ambiguity and provide certainty for all parties involved. This article serves as a comprehensive and practical guide to understanding the new rules, navigating the remaining ambiguities, and developing strategic responses to this new era of healthcare employment in Texas. To grasp the magnitude of the changes introduced by SB 1318, it is helpful to compare the old legal framework with the new one. The following table distills the most critical transformations, providing a quick-reference guide to the new legal landscape for healthcare non-compete agreements in Texas.

Feature	Law Before Sept. 1, 2025	Law After Sept. 1, 2025 (SB 1318)	Relevant Code Section
Covered Practitioners	Physicians explicitly; unclear for others.	Physicians, Dentists, Nurses (Professional & Vocational), and Physician Assistants.	Tex. Bus. & Com. Code §§ 15.50(b), 15.501
Geographic Scope	“Reasonable” standard; fact-specific, often litigated.	Strict 5-mile radius from primary practice location.	§§ 15.50(b)(4)(B), 15.501(b)(3)
Duration	“Reasonable” standard; often 1-2 years.	Strict 1-year maximum post-termination.	§§ 15.50(b)(4)(A), 15.501(b)(2)
Buyout Provision	Required for physicians at a “reasonable price,” often set by an arbitrator.	Mandatory for all covered practitioners, capped at one year’s total annual salary and wages.	§§ 15.50(b)(2), 15.501(b)(1)
Termination (Physicians)	Enforceable regardless of termination reason.	Void and unenforceable if physician is involuntarily terminated without “good cause”.	§ 15.50(d)
Clarity of Terms	No specific statutory requirement.	Must be “clearly and conspicuously stated in writing”.	§§ 15.50(b)(4)(C), 15.501(b)(4)

SB 1318 establishes a new, uniform set of requirements for non-compete agreements with a broad group of healthcare professionals. For the first time, dentists, nurses (both professional and vocational), and physician assistants are granted protections similar to those previously afforded only to physicians. Under the amended Texas Business & Commerce Code §§ 15.50(b) and the new § 15.501, any non-compete agreement entered into or renewed after September 1, 2025, is unenforceable unless it complies with four core mandates.

The 5-Mile Rule: A Hard Geographic Limit

The most significant change is the elimination of the subjective “reasonableness” test for geographic scope. Previously, a non-compete could restrict a practitioner from working within a large radius—sometimes 25 miles or more—and it was left to courts to decide if this was an excessive restraint. SB 1318 replaces this ambiguity with a hard cap: a non-compete may not restrict practice beyond a five-mile radius from the “location at which the health care practitioner primarily practiced” before termination. This bright-line rule provides immediate clarity and dramatically increases practitioner mobility, particularly in dense urban and suburban areas.

The 1-Year Limit: A Strict Maximum Duration

Similar to the geographic limit, the law now imposes an inflexible time limit on non-compete restrictions. The covenant must expire no later than the one-year anniversary of the date the contract or employment was terminated. This supplants the prior case-by-case analysis of what constituted a “reasonable” duration, which could vary based on specialty and market conditions, and provides a definitive end date for the restriction.

The Salary-Capped Buyout: From Punitive Penalty to Predictable Cost

Perhaps the most empowering change for practitioners is the reform of the mandatory buyout provision. Under the old law, physician non-competes had to include an option to buy out the restriction at a “reasonable price,” a vague term that often led to disputes. If the parties could not agree, the price would be determined by an arbitrator, introducing significant uncertainty, delay, and cost for the practitioner. This system gave employers considerable leverage to demand exorbitant sums based on speculative calculations of lost “goodwill,” effectively chilling a practitioner’s ability to exercise the buyout option. SB 1318 fundamentally alters this dynamic. The buyout option is now mandatory for all covered practitioners, and its price is capped at an amount no greater than the practitioner’s “total annual salary and wages at the time of termination”. This transforms the buyout from a potential penalty into a predictable, transactional cost. Both parties know the maximum price from the outset, removing the employer’s ability to use an inflated, subjective valuation as a deterrent. A practitioner can now perform a straightforward cost-benefit analysis: is the opportunity to practice freely within the five-mile zone worth a known, capped amount? This financial certainty rebalances the power dynamic and makes the buyout a viable, accessible option for many.

The “Clear and Conspicuous” Standard: A Mandate for Transparency

Finally, the new law introduces a plain-language requirement. The terms and conditions of the non-compete covenant must be “clearly and conspicuously stated in writing”. This provision is designed to ensure transparency and prevent practitioners from being bound by confusing or buried legal jargon. An agreement that fails to meet this standard of clarity risks being deemed unenforceable. While SB 1318 extends several key protections to a wider range of healthcare professionals, it also carves out a set of unique and powerful safeguards available only to physicians licensed by the Texas Medical Board. These provisions are found in the amended § 15.50 of the Business & Commerce Code.

Termination “Without Good Cause”: The Non-Compete Annihilator

The most potent new protection for physicians is a provision that links the enforceability of a non-compete directly to the reason for termination. Under the new § 15.50(d), a covenant not to compete is automatically void and unenforceable if a physician is involuntarily discharged from their contract or employment “without good cause”. Previously, the reason for a physician’s termination was irrelevant to the validity of their non-compete. An employer could terminate a physician for purely economic reasons, due to a personality conflict, or for no stated reason at all, and still seek to enforce the post-employment restriction. Now, the burden has shifted dramatically. To enforce a non-compete against an involuntarily terminated physician, the employer must be able to prove the termination was for “good cause.” The statute provides a specific definition: “a reasonable basis for discharge… 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”. This change effectively institutes a new due process requirement for employers. It forces a move away from informal or poorly justified termination decisions and necessitates the implementation of robust, formal human resources protocols. To preserve the enforceability of a non-compete, employers must now maintain meticulous documentation through regular performance reviews, progressive discipline policies, and clear, written records that can substantiate a “good cause” termination. This provision will likely create a new frontier of litigation, where disputes center not on the terms of the non-compete itself, but on whether the underlying termination met the statutory standard for “good cause.”

Preserved Rights (The Old Guard): Continuity of Care Provisions

SB 1318 also carries forward several pre-existing protections that remain exclusive to physicians. These rights, which are critical for ensuring continuity of patient care, are not explicitly extended to dentists, nurses, or physician assistants under the new law. A compliant physician non-compete must still:

• Allow access to a list of the physician’s patients seen or treated within one year of termination.
• Provide for patient access to medical records upon the patient’s authorization, for a reasonable fee.
• Permit the physician to provide continuing care and treatment to a specific patient during the course of an acute illness, even after termination.

While SB 1318 brings welcome clarity to many aspects of healthcare non-competes, it is as notable for what it does not say as for what it does. The law includes a key exclusion and leaves several critical questions unanswered, creating gray areas that will likely be defined by future court rulings.

The Administrative Carve-Out

The statute explicitly clarifies that for the purposes of these restrictions, the “practice of medicine” does not include “managing or directing medical services in an administrative capacity”. This means that practitioners—including physicians—who serve in purely non-clinical, administrative roles (such as a non-practicing Medical Director or a hospital executive) are not covered by the strict 5-mile/1-year/salary-cap rules. Non-compete agreements for these positions will continue to be governed by the old, flexible “reasonableness” standard under § 15.50(a).

Uncharted Waters: Key Ambiguities

The new law is silent on several important issues, creating uncertainty that both employers and practitioners must navigate carefully.

1. Applicability to Practice Sales: The statute does not address whether these strict limitations apply to non-compete covenants included in the sale of a medical or dental practice. Historically, courts have often treated non-competes arising from the sale of a business more deferentially than those in an employment context. The lack of guidance creates significant ambiguity for practice transitions.
2. Scope of “Covenant Not to Compete”: The law repeatedly uses the term “covenant not to compete” but does not define it, nor does it mention related restrictions like non-solicitation agreements. This raises the question of whether the new rules could be interpreted to apply to clauses that prohibit a departing practitioner from soliciting former patients or employees. As the traditional non-compete has been severely weakened, employers will likely pivot to strengthening these secondary covenants. This may lead them to draft more robust and specific non-solicitation and non-disclosure agreements (NDAs) to protect their patient base and confidential business information. Future legal battles may shift from the enforceability of the non-compete itself to the interpretation of what constitutes “solicitation.”
3. Definition of “Primary Practice Location”: The five-mile radius is measured from the practitioner’s “primary practice location,” but the law fails to define this critical term. This creates ambiguity for practitioners who work at multiple clinics, split time between a clinic and a hospital, or provide telehealth services from a remote location.

The passage of SB 1318 requires both healthcare employers and practitioners to proactively adapt their strategies. The following checklists provide actionable steps for navigating this new legal environment.

A Checklist for Employers and Practice Managers

• Audit All Contracts Immediately: The “auto-renewal” clause found in many employment contracts has become a legal tripwire. An old, restrictive agreement that automatically renews on or after September 1, 2025, will suddenly become subject to the new law, rendering its non-compliant terms unenforceable. It is imperative to inventory all practitioner contracts, identify their renewal dates, and decide whether to renegotiate them before the new law is triggered.
• Redraft Your Templates: All template employment and independent contractor agreements must be updated to comply with the 5-mile radius, 1-year duration, and salary-capped buyout requirements for any new hires or renewals post-effective date.
• Define “Primary Practice Location”: To prevent future disputes, new contracts for practitioners who work at multiple sites or remotely should proactively and explicitly define the “primary practice location” from which the five-mile radius will be measured.
• Implement a “Good Cause” Documentation Protocol: For physicians, the enforceability of a non-compete now hinges on the reason for an involuntary termination. Establish a formal, written process for performance management, progressive discipline, and termination decisions. Meticulous documentation is no longer just an HR best practice; it is a prerequisite for protecting the practice’s business interests.
• Strengthen Alternative Covenants: With the traditional non-compete significantly curtailed, focus on strengthening other protective measures. Bolster the specificity and enforceability of non-solicitation clauses (for both patients and staff) and non-disclosure agreements. Consider implementing proactive retention strategies, such as structured bonuses, improved benefits, or partnership tracks, that create incentives to stay rather than relying solely on post-employment restrictions.

A Guide for Healthcare Practitioners (Physicians, Nurses, Dentists, PAs)

• Scrutinize New and Renewing Contracts: Carefully review any employment agreement or renewal offer with an effective date on or after September 1, 2025. Ensure that any non-compete clause strictly adheres to the “Big Four” rules: a five-mile radius, a one-year duration, a buyout capped at one year’s salary, and clear, conspicuous language. Do not sign an agreement that contains non-compliant terms.
• Know Your Buyout Number: Understand that the price to be released from your non-compete is now capped at your total annual salary and wages. This knowledge provides you with a clear, calculable exit path and is a powerful point of leverage in any separation negotiation.
• Understand Your Termination Rights (Physicians Only): If you are a physician and are terminated involuntarily, the first question to ask is whether the termination was for “good cause.” If it was not related to your conduct or performance, the non-compete is likely void. This is a critical right that can secure your professional freedom.
• Watch Your Renewal Date: If you are currently under an older, more restrictive non-compete, pay close attention to your contract’s renewal date. An automatic renewal after September 1, 2025, will subject the agreement to the new, more favorable rules, potentially invalidating the old restrictions and providing a strategic opportunity to renegotiate or change employment.

Texas Senate Bill 1318 represents a fundamental rebalancing of the relationship between healthcare organizations and the clinical professionals they employ. By replacing a system of ambiguous standards and unpredictable litigation with a clear, standardized, and preemptive statutory framework, the law brings much-needed certainty to healthcare employment contracts. It enhances workforce mobility, promotes competition, and supports continuity of patient care by ensuring practitioners are not unreasonably restricted from practicing their profession. While employers can still use non-compete agreements to protect their legitimate business interests—such as investments in training, patient relationships, and confidential information—those interests must now be protected within well-defined and reasonable boundaries. For practitioners, the law provides greater freedom to pursue professional opportunities and make career choices without facing prohibitive geographic or financial barriers. As this new legal landscape takes shape, it is essential for all affected parties—from solo practitioners to large hospital systems—to seek tailored legal counsel to ensure compliance and strategically navigate their rights and obligations in this new era of Texas healthcare.