Law.com Texas Lawyer, “Key Changes Under Texas’ New Physician Noncompete Law,” by Erica LeBlanc, Esq. and Carol Stephenson, Esq., 9-26-2025

TEXAS LAWYER, September 26, 2025

Key Changes Under Texas’ New Physician Noncompete Law
Overall, the new provisions place a cap on time, area, activity, and buyout price for physicians and other health care practitioners.
By Erica LeBlanc and Carol Stephenson

Since 1989, Texas covenants not to compete have been governed by Subchapter E, Tex. Bus. & Com Code Ann Section 15.50 with few minor revisions until now. The 89th Texas Legislature and Governor Greg Abbott substantially overhauled the provisions that control physician covenants not to compete by the enactment of SB-1318. The act became effective Sept. 1, 2025 and will be applied prospectively to new agreements.
Until now, any Texas covenant not to compete has been enforceable if it is ancillary to or part of an otherwise enforceable agreement and if the restrictions as to time, geographical area, and scope of activity are reasonable and not greater than necessary to protect the business interests of the employer. Section 15.50(a). Section 15.50(b) dealt with the specific requirements for a physician’s noncompete agreement, but it did not alter the “reasonableness” standard of Section 15.50(a) as it related to physician agreements. However, SB-1318 has effectively rewritten Section 15.50(b) providing stricter and more precise limitations on restrictive provisions for physicians. Further, Section 15.501 was added to bring other health care practitioners, as defined in the Act, under the statute.
Consequently, the restrictions in noncompete agreements with physicians and certain other health care practitioners are no longer controlled by Section 15.50(a). Instead, Section 15.50(b) now provides the following new provisions:
· Time cap: The covenant must expire no later than the one-year anniversary of the date the contract or the date employment ended.
· Geographical cap: The geographical area cannot exceed a five-mile radius from the location at which the physician primarily practiced before the end of the contract or employment.
· The terms and conditions of the covenant must be clearly and conspicuously stated in writing.
In addition, subsection (2) of Section 15.50(b) has significantly modified the buyout provision, which used to be based on a “reasonable price,” or the price could be determined by an arbitrator at the option of either party or as appointed by the court. Now, the buyout price cannot exceed the physician’s total annual salary and wages at the time the contract or employment ended.

Also notable is the new carve out that the provisions of 15.50(b) do not apply to noncompetes covering physicians working in administrative roles managing or directing medical service. Another new protection for physicians is Subsection (d) of Section 15.50 which provides that a licensed physician’s covenant not to compete is void if the physician is involuntarily discharged from a contract or employment without good cause. Good cause under this section means there is a reasonable basis for the discharge directly related to the physician’s conduct, including on the job or otherwise, job performance or employment record.

SB-1318 also added Section 15.501 to the statute extending the limitations on noncompete agreements to other licensed health care practitioners, who are defined as dentists, professional or vocational nurses, and physician assistants. The limits on restrictions mirror those under Section 15.50(b) governing physician agreements, with one significant exception. Unlike licensed physicians, covenants not to compete continue to be enforceable against other health care practitioners, even if their employment was involuntarily terminated.

Overall, the new provisions place a cap on time, area, activity, and buyout price for physicians and other health care practitioners. Consequently, employers of physicians would be well-advised to review their noncompete documents for compliance with the new law. When considering how to move forward with structuring new noncompete agreements, it may be helpful to consider what prompted the legislature to pass SB-1318. Reports on the bill by the senate, house, and relevant committees included statements from the bill’s sponsor concerning the need for the changes to the statute and the benefits to be derived from it. The remarks noted:
· Physician noncompete agreements are often extremely broad.
· The agreements place large geographic boundaries around the employer’s business (50 to 100-mile radius). If the employer is a large hospital network, its claimed business area can span over a large region.
· The noncompete agreements impact the doctor-patient relationship and can be devastating to patients, who discover their doctor is no longer able to provide care because of the geographic restrictions.
· Buyout amounts can be significant and often exorbitant.
· Placing limits on the scope of restrictions will protect patient access to care, reduce legal ambiguity and the burden of litigation, safeguard the integrity and mobility of the health care workforce, and promote competition by restricting the amount of the buyout.  , e.g., S. Comm. On Health & Human Serv., Bill Analysis Tex. S.B. 1318, 89th Leg., R.S. (as filed June 23, 2025).

Most changes are more beneficial to the individual physician or health care practitioner and give the employers less ability to restrict competition in the event of separation. Because the changes provide more specificity as to the allowable limitations on time, area, buyouts and activity, one would assume there would be less ambiguity in compliant contracts; that in turn should create more predictability in both application and interpretation by the courts going forward, should litigation ensue. Further, the caps on time and geographic area may serve to relieve both the physician and other health care practitioners from burdensome litigation since the caps will likely work as de facto reasonable restrictions under the law. If a contract were to stay within the prescribed caps, it would likely be very difficult to persuade a court that those caps were unreasonable.

As a final note, these significant changes to the noncompete law will apply only prospectively— that is, only to contracts executed after the effective date of Sept. 1, 2025. This means that all contracts executed prior thereto will still be governed solely by the “reasonableness” standard of 15.50(a). However, with the new law now in effect providing greater limitations on restrictive covenants, it remains to be seen if this will affect the courts’ interpretation and application of the “reasonableness” standard for these older contracts. Previously, there may have been situations where, for instance, a three-year noncompete for a physician seemed reasonable. With the guidance of the new law and the legislative intent, one wonders if the court would still come to that same conclusion. Will courts consciously or subconsciously be influenced by the legislature’s implicit findings and the new law when making their determinations on these older contracts? It remains to be seen and time will tell.

Author bios:
Erica LeBlanc is co-managing partner of the Dallas office of Kaufman Dolowich LLP and a member of the firm’s labor and employment Law team. She can be reached at erica.leblanc@kaufmandolowich.com.

Carol Stephenson is of counsel in Kaufman Dolowich’s Dallas office and a member of the firm’s labor and employment law team. She can be reached at carol.stephenson@kaufmandolowich.com.

Reprinted with permission from the Sept. 26, 2025 edition of “Texas Lawyer” © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.

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