Physician non-compete agreements are a frequent source of conflict in Texas healthcare. Employers rely on them to protect their investment in recruiting, training, and retaining patients. Physicians, on the other hand, often view these clauses as unfair restrictions on their professional freedom.
The reality is that Texas law does allow non-compete agreements for physicians, but only if they are carefully drafted. In 2025, the landscape changed significantly with the passage of Senate Bill 1318, which imposes strict new requirements on healthcare non-competes. If you’re facing this issue, our Texas Healthcare Law attorneys can help clarify your options.
What Texas Law Requires
Under Texas Business & Commerce Code §15.50, as amended by SB 1318, a physician non-compete is only enforceable if it satisfies specific requirements. For agreements entered into or renewed on or after September 1, 2025, these contracts must:
- Include mandatory limits on time, geography, and scope of practice. The restriction can last no longer than one year and must be limited to a five-mile radius from the physician’s primary practice location at the time of termination. The restriction must be tailored to protect legitimate business interests, not to permanently prevent a physician from practicing.
- Provide a capped buy-out option. Physicians must have the ability to “purchase” their way out of the non-compete for an amount not exceeding their total annual salary and wages at the time of termination. This replaces the previous “reasonable price” standard with a clear, objective cap.
- Guarantee patient access to medical records. Patients cannot lose continuity of care simply because their doctor leaves a practice.
- Require treatment for patients with ongoing conditions. Physicians must continue to care for patients who are in the middle of acute treatment, even after transitioning away from a practice.
- State terms clearly and conspicuously. The terms must be presented using bold face type, capital letters, or contrasting colors so that a reasonable person would notice them.
These safeguards exist to balance the needs of both sides. Employers gain some protection for their business, while physicians and patients retain essential rights. Our Regulatory & Compliance team frequently reviews physician contracts to ensure they meet these statutory requirements.
How Texas Law Defines “Reasonable” Under SB 1318
As of September 1, 2025, Texas law no longer leaves the definition of “reasonable” open to court interpretation. Senate Bill 1318 establishes specific, mandatory limits for physician non-compete agreements entered into or renewed on or after that date.
- Time limits. Non-compete agreements can last no longer than one year following the termination of employment. Agreements that exceed this duration are unenforceable under the new law.
- Geographic boundaries. The maximum geographic scope is limited to a five-mile radius from the location where the physician primarily practiced before termination. This standardized approach replaces the previous case-by-case analysis that varied between urban and rural settings.
- Buyout cap. The buyout amount cannot exceed the physician’s total annual salary and wages at the time of termination. This removes the previous ambiguity around what constituted a “reasonable price” and eliminates the need for arbitration to determine buyout amounts.
- Scope of practice. The law clarifies that “the practice of medicine” does not include administrative duties, such as managing or directing medical services for a medical practice. This means non-competes focused solely on administrative roles may be structured differently than those restricting clinical practice.
- Extended coverage. SB 1318 extends these same requirements to dentists, registered nurses, vocational nurses, and physician assistants, marking the first time Texas law has imposed specific restrictions on non-competes for these healthcare practitioners.
- Important timing note: SB 1318 applies only to agreements entered into or renewed on or after September 1, 2025. Existing agreements executed before this date remain governed by prior law, though courts may consider the new statutory standards when evaluating the reasonableness of pre-existing restrictions.
These mandatory limits represent a significant shift from Texas’s previous approach, which required courts to conduct a fact-specific analysis of whether restrictions were reasonable given the circumstances. Healthcare employers and physicians should review all agreements to ensure compliance with these new bright-line rules.
Common Pitfalls for Physicians and Employers
Even with the new statutory clarity, many non-competes can still fail if not properly drafted. Some of the most common mistakes include:
- Exceeding the statutory limits. Under SB 1318, any geographic restriction beyond five miles or any duration beyond one year renders the agreement unenforceable. Employers cannot simply ask courts to “blue pencil” or reduce excessive restrictions—the entire non-compete may be struck down.
- Setting buyouts above the salary cap. The buyout amount cannot exceed the physician’s total annual salary and wages at termination. Employers who set higher amounts or use formulas that inflate the buyout risk having the entire agreement invalidated.
- Vague specialty or location definitions. Ambiguity about what constitutes the physician’s “primary practice location” can lead to disputes. Clear definitions in the contract are essential.
- Failing to document termination for good cause. For physicians terminated without good cause, SB 1318 prohibits enforcement of the non-compete entirely. Employers must carefully document the reasons for termination to preserve their ability to enforce these agreements.
- Overlooking contract renewals. Many existing agreements contain automatic renewal provisions. If a pre-September 2025 contract renews after the effective date, it must comply with SB 1318’s requirements or risk being unenforceable.
- Inadequate notice and formatting. The new law requires that non-compete terms be “clearly and conspicuously stated” using bold type, capitals, or contrasting colors. Standard contract formatting may no longer suffice.
Each of these pitfalls creates significant risk. For physicians, it may mean being trapped in an unenforceable contract that nonetheless requires legal action to challenge. For employers, it may mean that years of reliance on an agreement could be undone in a single legal challenge. Our attorneys often step in as healthcare outside general counsel to resolve disputes before they escalate.
What Physicians Should Consider
For physicians, signing a non-compete is not a small step. It can define career options for years. Before agreeing to terms, physicians should think carefully about:
- Career mobility. Even with the five-mile restriction, consider how this will affect your ability to practice in your preferred community. In densely populated areas, five miles may encompass dozens of competing practices.
- Buy-out feasibility. While the law now caps buyouts at annual salary, is that amount financially realistic for you? Would exercising the buyout leave you in financial distress?
- Patient relationships. Will the agreement allow you to continue treating patients who rely on your care, especially those in acute treatment phases?
- Termination protections. Understand that if you are terminated without good cause, the non-compete is likely unenforceable. However, proving lack of good cause may still require legal action.
- Contract renewal dates. If you’re currently employed under a pre-SB 1318 agreement, be aware of when your contract renews. A renewal after September 1, 2025 may trigger the new requirements—or create an opportunity to negotiate better terms.
Taking the time to review these points, ideally with legal counsel, can prevent career-limiting consequences later.
How SB 1318 Affects Healthcare Employers
Healthcare employers must adapt quickly to the new legal landscape. Key considerations include:
- Updating template agreements. All new physician, dentist, nurse, and physician assistant contracts must comply with the one-year, five-mile, and salary-cap requirements.
- Reviewing existing contracts. While SB 1318 doesn’t retroactively invalidate pre-September 2025 agreements, employers should assess whether existing restrictions would survive court scrutiny under the new statutory framework.
- Bifurcating restrictions. Consider separating clinical practice restrictions (subject to SB 1318) from administrative, ownership, or transaction-related non-competes (which may not be covered by the statute).
- Documenting primary practice locations. To avoid disputes over the five-mile radius, clearly define and document where each practitioner “primarily practices” in their employment agreement.
- Establishing termination protocols. Develop clear procedures for documenting “good cause” terminations, as this determination now directly affects enforceability.
- Training HR and management. Ensure that those responsible for hiring and managing healthcare practitioners understand the new requirements and the risks of non-compliance.
The stakes are high. Non-compliant agreements aren’t just unenforceable. They can expose employers to claims of unfair business practices and damage recruitment efforts.
How NWT Helps Physicians and Employers
At Nichols Weitzner Thomas LLP, we regularly advise on physician non-competes from both sides of the table, now with a focus on ensuring compliance with SB 1318.
For physicians, we review contracts before they are signed, negotiate terms that protect future opportunities, and step in when disputes arise. We help physicians understand whether existing agreements will be affected by renewals and advise on strategic options when facing restrictive covenants.
For employers, we draft agreements that safeguard business interests while staying within the new statutory boundaries. We help healthcare organizations transition from pre-SB 1318 agreements to compliant new contracts, and we provide counsel on how to structure non-competes for administrative and non-clinical roles that may fall outside the statute’s scope.
Our goal is simple: to protect the people and organizations at the center of Texas healthcare while ensuring compliance with state law.
Learn more about our Healthcare Law services and Healthcare Payor Reimbursement Disputes services.
Protecting Your Career and Practice in Texas
Physician non-compete agreements remain powerful tools in Texas, but SB 1318 has fundamentally reshaped the rules. As of September 1, 2025, these agreements are enforceable only if they include a capped buy-out clause, provide patient protections, and stay within strict limits: one year in duration, five miles in geographic scope, and clearly stated in conspicuous language.
For physicians, that means reviewing every contract carefully to ensure compliance and to avoid restrictions that could stall a career. The new law provides important protections, but only if you understand and assert your rights.
For employers, it means drafting agreements that actually stand up in court. The days of negotiating “reasonableness” on a case-by-case basis are largely over—the statute now provides clear boundaries, and non-compliance means unenforceability.
At Nichols Weitzner Thomas LLP, we help healthcare providers navigate these agreements with confidence. Whether you’re reviewing a new contract, renegotiating terms, facing a renewal under the new law, or dealing with a dispute, our attorneys bring the experience and insight needed to protect your future.
Schedule a consultation today to discuss your physician non-compete agreement.
This article is provided for informational purposes only and does not constitute legal advice. The analysis of pending legislation is based on current proposals, which may change before final passage. Healthcare providers should consult with qualified legal counsel regarding their specific circumstances.
