Governor Greg Abbott has signed SB 1318, bringing major changes to non-compete agreements in the healthcare industry, effective September 1, 2025. The new rules apply to agreements entered into or renewed on or after the effective date.

Key Changes for Physicians
SB 1318 revises the enforceability criteria for non-competes involving physicians licensed by the Texas Medical Board, while clarifying that “practicing medicine” does not include administrative roles overseeing medical services. The law imposes the following limits:

• Geographic Scope: Restricted to a five-mile radius from the physician’s primary practice location at termination.
• Duration: Cannot exceed one year after termination.
• Buyout Cap: Must include a buyout option capped at the physician’s annual salary and wages at termination, replacing the prior “reasonable price” standard and eliminating arbitration to set the amount.
• Clear Terms: All provisions must be stated clearly and conspicuously in writing.
• Termination Without Good Cause: Non-compete is void if the physician is terminated without good cause, defined as a reasonable basis tied to conduct, performance, or contractual record.

Expansion to Other Healthcare Practitioners
The law adds Section 15.501 to extend similar non-compete restrictions to:

• Dentists
• Professional or vocational nurses
• Physician assistants

SB 1318 represents a significant shift in Texas non-compete law for the healthcare sector, requiring employers to reassess and revise existing agreements to ensure compliance.