Relating to restrictions on covenants not to compete for physicians and certain health care practitioners, the official text

S.B. No. 1318

AN ACT

relating to restrictions on covenants not to compete for physicians

and certain health care practitioners.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 15.50, Business & Commerce Code, is

amended by amending Subsections (a) and (b) and adding Subsections

(b-1) and (d) to read as follows:

(a) Notwithstanding Section 15.05 [of this code,] and

subject to any applicable provision of Subsection (b) and Section

15.501, a covenant not to compete is enforceable if it is ancillary

to or part of an otherwise enforceable agreement at the time the

agreement is made to the extent that it contains limitations as to

time, geographical area, and scope of activity to be restrained

that are reasonable and do not impose a greater restraint than is

necessary to protect the goodwill or other business interest of the

promisee.

(b) A covenant not to compete relating to the practice of

medicine is enforceable against a person licensed as a physician by

the Texas Medical Board if such covenant complies with the

following requirements:

(1) the covenant must:

(A) not deny the physician access to a list of the

physician's [his] patients whom the physician [he] had seen or

treated within one year of termination of the contract or

employment;

(B) provide access to medical records of the

physician's patients upon authorization of the patient and any

copies of medical records for a reasonable fee as established by the

Texas Medical Board under Section 159.008, Occupations Code; and

(C) provide that any access to a list of patients

or to patients' medical records after termination of the contract

or employment shall not require such list or records to be provided

in a format different than that by which such records are maintained

except by mutual consent of the parties to the contract;

(2) the covenant must provide for a buyout [buy out] of

the covenant by the physician in an amount that is not greater than

the physician's total annual salary and wages at the time of

termination of the contract or employment [at a reasonable price

or, at the option of either party, as determined by a mutually

agreed upon arbitrator or, in the case of an inability to agree, an

arbitrator of the court whose decision shall be binding on the

parties]; [and]

(3) the covenant must provide that the physician will

not be prohibited from providing continuing care and treatment to a

specific patient or patients during the course of an acute illness

even after the contract or employment has been terminated; and

(4) the covenant must:

(A) expire not later than the one-year

anniversary of the date the contract or employment has been

terminated;

(B) limit the geographical area subject to the

covenant to no more than a five-mile radius from the location at

which the physician primarily practiced before the contract or

employment terminated; and

(C) have terms and conditions clearly and

conspicuously stated in writing.

(b-1) For the purposes of Subsection (b), 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.

(d) Notwithstanding any other law, a covenant not to compete

relating to the practice of medicine is void and unenforceable

against a person licensed as a physician by the Texas Medical Board

if the physician is involuntarily discharged from contract or

employment without good cause. For purposes of this subsection,

"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.

SECTION 2. Subchapter E, Chapter 15, Business & Commerce

Code, is amended by adding Section 15.501 to read as follows:

Sec. 15.501. COVENANTS NOT TO COMPETE AGAINST HEALTH CARE

PRACTITIONERS. (a) In this section, "health care practitioner"

means:

(1) a person licensed by the State Board of Dental

Examiners to practice dentistry in this state;

(2) a person licensed under Chapter 301, Occupations

Code, to engage in professional or vocational nursing; or

(3) a physician assistant licensed under Chapter 204,

Occupations Code.

(b) A covenant not to compete relating to the practice of

dentistry or nursing, or practice as a physician assistant, as

applicable, is not enforceable against a health care practitioner

unless the covenant:

(1) provides for a buyout of the covenant by the health

care practitioner in an amount that is not greater than the

practitioner's total annual salary and wages at the time of

termination of the practitioner's contract or employment;

(2) expires not later than the one-year anniversary of

the date the contract or employment has been terminated;

(3) limits the geographical area subject to the

covenant to no more than a five-mile radius from the location at

which the health care practitioner primarily practiced before the

contract or employment terminated; and

(4) has terms and conditions that are clearly and

conspicuously stated in writing.

SECTION 3. Section 15.52, Business & Commerce Code, is

amended to read as follows:

Sec. 15.52. PREEMPTION OF OTHER LAW. The criteria for

enforceability of a covenant not to compete provided by Sections

[Section] 15.50 and 15.501 [of this code] and the procedures and

remedies in an action to enforce a covenant not to compete provided

by Section 15.51 [of this code] are exclusive and preempt [any]

other law, including [criteria for enforceability of a covenant not

to compete or procedures and remedies in an action to enforce a

covenant not to compete under] common law [or otherwise].

SECTION 4. The changes in law made by this Act apply only to

a covenant not to compete entered into or renewed on or after the

effective date of this Act. A covenant not to compete entered into

or renewed before the effective date of this Act is governed by the

law in effect on the date the covenant was entered into or renewed,

and the former law is continued in effect for that purpose.

SECTION 5. This Act takes effect September 1, 2025.

______________________________
______________________________

President of the Senate
Speaker of the House

I hereby certify that S.B. No. 1318 passed the Senate on

April 10, 2025, by the following vote: Yeas 30, Nays 0; and that

the Senate concurred in House amendment on May 28, 2025, by the

following vote: Yeas 31, Nays 0.

______________________________

Secretary of the Senate

I hereby certify that S.B. No. 1318 passed the House, with

amendment, on May 23, 2025, by the following vote: Yeas 126,

Nays 12, two present not voting.

______________________________

Chief Clerk of the House

Approved:

______________________________

Date

______________________________

Governor