Big Changes Ahead for Texas Medical Professional Non-Competes
July 18, 2025 by Margaret Mead
Effective September 1, 2025, changes to the Texas Business & Commerce Code (the “Non-Compete Act”) in TX SB 1318 take effect. These changes will it make it much harder to enforce non-competes against certain medical professionals and create important new protections for physicians, dentists, nurses, and physician assistants who sign non-competes after August 2025.
What’s Changing for Physician Non-Competes?
The Texas Non-Compete Act has long required that non-competes relating to the practice of medicine (1) comply with general Texas requirements for non-competes, (2) contain certain continuity of care and medical compliance provisions, and (3) contain a non-compete buy-out provision at a “reasonable price” or a price determined by an arbitrator.
Starting on September 1, 2025, the rules for physician non-competes will tighten. Here’s what will be required:
- Buy-Out Cap: The buy-out amount cannot exceed “the physician’s total annual salary and wages at the time of termination of the contract or employment.”
- One Year Limit: The non-compete term may not last more than one year after termination of the contract or employment.
- Narrow Scope: The non-compete may not encompass a larger area than a 5-mile radius from the location where the physician practiced.
- Clear Language: The non-compete’s terms must be clearly and conspicuously stated in writing.
- Discharge Protection: A covenant not to compete relating to the practice of medicine is void and unenforceable against a physician if the physician is involuntarily discharged from contract or employment without good cause. “Good cause” means 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.
Further, the 2025 law specifies that the practice of medicine does not include “managing or directing medical services in an administrative capacity for a medical practice or other health care provider,” bringing clarity to the sometimes-disputed issue of whether a physician who only provides services as an administrator is “engaged in the practice of medicine” under the Non-Compete Act.
In practice, this means that it may be difficult to enforce any non-compete against a physician who is involuntarily discharged, unless there is evidence of misconduct. Note that the definition of “good cause” is exceptionally vague and likely to be the subject of factual disputes. One possible unintended consequence of the new law may be that physicians might be more likely to wait for termination rather than resign in the hope that the employer will elect to discharge them without cause, rendering their non-compete restrictions unenforceable.
New Protections for Dentists, Some Nurses, and Physician Assistants
Prior to the amendment, there were no protections for medical professionals other than physicians. Now, non-competes will be unenforceable against dentists, professional or vocational nurses, or physician assistants unless:
- They provide for a buyout capped at the health care practitioner’s total annual salary at termination.
- The restriction expires not later than one year from termination.
- The geographical area is no more than a five-mile radius from the location at which the health care practitioner primarily practiced; and
- The non-compete’s terms are clearly and conspicuously stated in writing.
Important Note: The New Rules Are Not Retroactive
These changes apply only to non-competes signed or renewed on or after September 1, 2025. Earlier agreements will still be governed by the law in effect on the date the covenant was entered into or renewed. Because the changes are tied to the date of the agreement, not the date of the enforcement or the date a lawsuit is filed, this means that employers should take a close look at current and upcoming contracts with covered medical professionals before the September 1, 2025, effective date.
Margaret Mead
margaret@brownfoxlaw.comMargaret Mead is a board-certified labor and employment attorney, with over two decades of experience. As a fierce litigator, she has represented clients in Texas State and federal courts and before state and federal agencies (EEOC, TWC, Department of Labor). Originally from Kansas and a KU Alumni, Ms. Mead is a Jayhawks basketball enthusiast. She enjoys attending local musical and dance performances. She also enjoys travel and scuba-diving.
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