{"id":8429,"date":"2025-06-23T16:25:13","date_gmt":"2025-06-23T16:25:13","guid":{"rendered":"https:\/\/www.europesays.com\/us\/8429\/"},"modified":"2025-06-23T16:25:13","modified_gmt":"2025-06-23T16:25:13","slug":"texas-sb1318-limits-health-care-noncompetes-starting-sept-2025","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/8429\/","title":{"rendered":"Texas SB1318 Limits Health Care Noncompetes Starting Sept. 2025"},"content":{"rendered":"<p style=\"font-weight:400;\">Sweeping changes to noncompete covenants are set to take effect on\u00a0<strong style=\"font-style:inherit;\">September 1, 2025<\/strong>, for health care employers in Texas. These changes stem from recent amendments to Texas\u2019 noncompete statute. These changes will:<\/p>\n<ul style=\"font-weight:400;\">\n<li style=\"font-style:inherit;font-weight:inherit;\">Expand Texas\u2019 heightened enforceability requirements to nearly all health care practitioners.<\/li>\n<li style=\"font-style:inherit;font-weight:inherit;\">Impose strict limits on the duration and geographic area of applicable noncompete covenants.<\/li>\n<li style=\"font-style:inherit;font-weight:inherit;\">Cap the buyout option that must be provided to covered health care practitioners.<\/li>\n<\/ul>\n<p>Who Is Impacted?<\/p>\n<p style=\"font-weight:400;\">The recent amendments to Texas\u2019 noncompete statute were enacted through Texas Senate Bill 1318 (SB 1318) that was signed into law by Governor Abbott on June 20, 2025. It will impact Texas-licensed physicians, dentists, nurses (including advanced practice nurses), physician assistants, and health care entities that execute noncompete covenants with the aforementioned health care practitioners. Downstream, these amendments have the potential to alter various health care business models, and the value assigned to health care entities in mergers and acquisitions.<\/p>\n<p>What Are the Key Changes?<\/p>\n<p style=\"font-weight:400;\">Since 1999, the Texas noncompete statute has imposed heightened requirements for securing enforceable covenants with physicians licensed by the Texas Medical Board. SB 1318 takes these protections a step further by incorporating the following heightened requirements:<\/p>\n<ul style=\"font-weight:400;\">\n<li style=\"font-style:inherit;font-weight:inherit;\"><strong style=\"font-style:inherit;\">Mandatory\/Salary-Capped Buyout Options<\/strong>\u00a0\u2013 Similar to physicians, mandatory buyout clauses must now be integrated into noncompete covenants with dentists, nurses\u00a0and physician assistants. The amendments eliminate the statute\u2019s open-ended \u201creasonable price\u201d requirement and will now require buyout clauses to not exceed a covered individual\u2019s \u201ctotal annual salary and wages at the time of termination.\u201d For many agreements, this will result in a significant reduction from previous buyout clauses.<\/li>\n<li style=\"font-style:inherit;font-weight:inherit;\"><strong style=\"font-style:inherit;\">One-Year Duration<\/strong>\u00a0\u2013 Noncompete covenants that are executed with physicians and other health care practitioners will be limited to one (1) year following the termination of the covered individual\u2019s contract or employment.<\/li>\n<li style=\"font-style:inherit;font-weight:inherit;\"><strong style=\"font-style:inherit;\">Five-Mile Radius<\/strong>\u00a0\u2013 The geographic area of noncompete covenants that are executed with physicians and other health care practitioners will now be limited to \u201ca five-mile radius from the location at which the health care practitioner primarily practiced before the contract or employment terminated.\u201d<\/li>\n<li style=\"font-style:inherit;font-weight:inherit;\"><strong style=\"font-style:inherit;\">Termination Without \u201cGood Cause\u201d for Physicians<\/strong>\u00a0\u2013 The circumstances of a physician\u2019s termination will impact the enforceability of their noncompete covenant. Noncompete covenants will be void and unenforceable against a physician if they are involuntarily terminated without \u201cgood cause,\u201d which is defined as \u201ca reasonable basis for discharge . . . that is directly related to the physician\u2019s conduct, including the physician\u2019s conduct on the job, job performance\u00a0and contract or employment record.\u201d Importantly, this distinction is\u00a0limited to physicians. The enforceability of noncompete covenants that are executed with other health care providers will not be impacted by the circumstances of their termination.<\/li>\n<li style=\"font-style:inherit;font-weight:inherit;\"><strong style=\"font-style:inherit;\">Clear and Conspicuous Language<\/strong>\u00a0\u2013 Noncompete covenants that are executed with physicians and other health care practitioners must now \u201chave terms and conditions clearly and conspicuously stated in writing.\u201d SB 1318 does not expand further on this requirement, but it will result in noncompete covenants being susceptible to attack on this basis.<\/li>\n<li style=\"font-style:inherit;font-weight:inherit;\"><strong style=\"font-style:inherit;\">Managerial\/Administrative Carve-Out<\/strong>\u00a0\u2013 Before the enactment of SB 1318, Texas\u2019 heightened enforceability requirements extended to most physician-entered noncompete covenants \u201crelated to the practice of medicine\u201d (excluding certain business ownership interests). This created some ambiguity regarding when these heightened requirements were triggered. SB 1318 partially resolves this by emphasizing \u201cthe practice of medicine does not include managing or directing medical services in an administrative capacity for a medical practice or other health care provider.\u201d Stated differently, noncompete covenants that are executed with physicians employed solely in a managerial or administrative capacity will not be subject to these heighted requirements.<\/li>\n<\/ul>\n<p>When Do These Changes Go into Effect?<\/p>\n<p style=\"font-weight:400;\">The changes go into effect on September 1, 2025. Importantly, these changes are prospective in nature and only apply to noncompete covenants that are entered into or renewed on or after this date\u2014meaning that preexisting noncompete covenants will continue to be governed by Texas\u2019 noncompete laws existing before the effective date of SB 1318.<\/p>\n<p>What\u2019s Next?<\/p>\n<p style=\"font-weight:400;\">These amendments are consistent with the nationwide trend towards more restrictions on the permissive use of noncompete covenants. While these amendments are not retroactive, it is conceivable that judges may still take these amendments into consideration when analyzing the enforceability of preexisting covenants in future litigation under Texas\u2019 current \u201cno greater than necessary\u201d standard. In turn, employers will need to weigh whether they make these changes on a rolling basis or preemptively amend existing agreements and consider other avenues for protection.<\/p>\n","protected":false},"excerpt":{"rendered":"Sweeping changes to noncompete covenants are set to take effect on\u00a0September 1, 2025, for health care employers in&hellip;\n","protected":false},"author":3,"featured_media":8430,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35],"tags":[210,1141,1142,67,132,68],"class_list":{"0":"post-8429","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-health-care","8":"tag-health","9":"tag-health-care","10":"tag-healthcare","11":"tag-united-states","12":"tag-unitedstates","13":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/114733615063941651","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/8429","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=8429"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/8429\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/8430"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=8429"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=8429"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=8429"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}