SB 1318: Key Changes to Physician and Medical Non-Compete Agreements (Effective Sept. 1, 2025)
Non-Compete for Doctors and Other Medical Professionals
SB 1318 went into effect on Sept. 1, 2025. This new law amends Chapter 15.E of the Business and Commerce Code pertaining to restraints of trade. The amendments to Chapter 15.E are listed below, and these changes expressly apply only to non-compete agreements entered or renewed on or after Sept. 1, 2025. Non-competes signed or renewed before Sept. 1, 2025, will be governed by the former version of the code.
Scope of Chapter 15.E Amended. SB 1318 clarifies that the specific restrictions applicable to medical practitioners do not apply to a person whose practice consists of merely managing or directing medical services in an administrative capacity for a medical practice or other healthcare practitioner. However, SB 1318 clarifies that these restrictions do apply to licensed nurses, physician assistants, and dentists.
Five-Mile Radius. Non-competes must now be limited to a five-mile radius from the physician’s primary practice location at the time of termination.
One-Year Terms. Non-compete restrictions must now expire one year after the termination of the physician’s contract or employment.
Caps on Buyouts. Chapter 15.E previously required all non-competes to be subject to a reasonable buyout at the physician’s option. SB 1318 now limits the amount of that buyout to the physician’s total annual salary and wages as of the date of termination.
Conspicuous Requirement: The terms and conditions of the agreement must be stated clearly and conspicuously in writing. Conspicuous has a particular meaning under Texas Law:
For cause Removal. If a physician is terminated without “good cause” the non-compete becomes void and unenforceable. The standard for good cause appears to be demanding as it requires: “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.” Emphasis added.
Of course, this is not an exhaustive discussion of the law applicable to these issues. For more information on this topic, please email Shannon Wilde, business lawyer with BRANSCOMB LAW His contact information is swilde@branscomblaw.com or (361) 886-3800.
