Overview

Governor Abbott signed SB 1318 into law this June, after passage by the Legislature in late May 2025. It amends Texas Business & Commerce Code § 15.50 for physicians and creates a new § 15.501, extending many of the statute’s protections to dentists, professional and vocational nurses, and physician assistants. The law goes into effect September 1, 2025 and applies only to agreements entered into or renewed on or after that date.

Key Requirements for Covered Practitioners (Physicians, Dentists, Nurses, PAs)

For non‑competes entered or renewed on or after September 1, 2025, the following requirements apply to all covered healthcare practitioners under §§ 15.50 and 15.501:

1. Mandatory Buy‑Out Provision
   Must allow buy‑out at no more than the practitioner’s total annual salary and wages at the time of termination.
2. Duration Cap
   The covenant must expire no later than one year after termination of employment or contract.
3. Geographic Restriction
   Restricted area limited to a five‑mile radius from the location where the practitioner primarily practiced immediately before termination.
4. Clarity and Transparency
   All terms and conditions must be clearly and conspicuously stated in writing.

Physician‑Specific Protection: “Good Cause” Voidance

A physician’s non‑compete is rendered void and unenforceable if the physician is involuntarily discharged without “good cause.”  “Good cause” is defined by statute as, “[a] reasonable basis for discharge of a physician … directly related to the physician’s conduct, including conduct on the job or otherwise, job performance, and contract or employment record.” 

This narrow standard excludes layoffs, restructuring, reimbursement-related separations, economic decisions, or other terminations not tied to unacceptable performance or conduct.

Administrative‑Role Exception

SB 1318 clarifies that the "practice of medicine” does not include managing or directing medical services in an administrative capacity. Therefore, physician non‑competes tied strictly to administrative roles (e.g. medical directors) are governed by the more general “reasonableness” standard under § 15.50(a)—not by SB 1318’s heightened protections.

Preemption of Other Law

SB 1318 amends § 15.52 to make the statutory enforceability criteria in §§ 15.50 and 15.501 exclusive, expressly preempting any common‑law or equitable bases for enforcing covered non‑competes.

Practical Recommendations

For Healthcare Employers

• Audit all non‑compete forms: Ensure they incorporate the one‑year duration, five‑mile radius, and buy‑out cap in clear, conspicuous writing.
• Define and document “primary practice location”, especially for practitioners with multiple sites.
• Include a precise definition of “good cause” in physician contracts and maintain procedures to document good cause if termination arises.
• Bifurcate administrative vs. clinical non‑compete terms where appropriate to preserve enforceability under applicable standards.
• Review renewal and auto‑renewal provisions—any renewal on or after September 1, 2025, will trigger SB 1318 compliance. 

For Healthcare Practitioners

• Understand your rights: Physicians fired without good cause are entitled to have their non‑compete voided entirely.
• Read contract language carefully: Ensure cap on buy‑out, explicit duration/geographic limits, clarity of terms, and definitions align with the new statute.
• Negotiate early: Agreements entered before the effective date (9/1/2025) may avoid SB 1318 constraints, unless they are renewed thereafter.

Conclusion

SB 1318 marks one of the most significant updates to Texas’ physician non‑compete statute in decades, creating uniform statutory limits on duration, geography, and buy‑out capped to compensation, expanding coverage to additional healthcare practitioners, and introducing a robust “good cause” protection for physicians. 

Healthcare providers and employers should act now to align all agreements and internal policies with SB 1318’s requirements. If you would like assistance update drafting compliant agreements, defining statutory terms, or training your HR/legal team, please feel free to reach out.