Non-Compete Agreements

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UPDATE

Texas’s S.B. 1318 was signed into law. As a result, restrictive covenants entered into or renewed on or after September 1, 2025, for the following healthcare practitioners in Texas must comply with the new law:

  • Physicians;
  • Dentists;
  • Nurses; and
  • Physician assistants.

To comply with the law, new covenants related to the clinical practice must:

  1. provide for a buyout 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. expire not later than the one-year anniversary of the date the contract or employment has been terminated; and
  3. limit 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.

These provisions must be clearly and conspicuously stated by using bold face type, capital letters, or contrasting colors so that a reasonable person would notice them.

Physician non-competes are subject to the additional provisions of the Act discussed below.

Takeaways

  • SB 1318 would expand non-compete limitations on physicians, dentists, nurses, and physician assistants.
  • Restrictive covenants would be limited to one year in duration and a five-mile geographic scope.
  • If enacted, the law would take effect September 1, 2025, and apply only to new or renewed agreements, prompting employers to review and revise their current contracts.

A significant proposal that would limit non-compete agreements for physicians, dentists, nurses, and physician assistants in Texas is headed to Governor Abbott’s desk. Senate Bill 1318 (SB 1318), authored by Senator Charles Schwertner seeks to balance employer protections with workforce mobility and patient care.

For healthcare employers, the legislation will require substantial changes to new non-compete contracts in Texas.Continue Reading UPDATED: Texas Reshapes Non-Competes for Healthcare Workers: What Employers Need to Know

On July 3, 2024, Judge Ada E. Brown of the United States District Court for the Northern District of Texas issued a preliminary injunction in Ryan et al. v. Federal Trade Commission, preventing the FTC’s rule banning most noncompetes from going into effect, but only for the party who brought the litigation challenging the rule, Ryan, Inc. The Court promised that it would enter a final ruling on the merits of the action by August 30, 2024—just days before the FTC rule is set to go into effect. That final ruling likely will have implications for the rule’s enforceability throughout the nation.Continue Reading Judge Preliminarily Pauses FTC Noncompete Ban as Applied to the Texas Challengers; Ruling on the Merits Expected in August

In an open commission meeting on Tuesday, April 23, 2024, the Federal Trade Commission (FTC) voted 3-to-2 to ban nearly all non-compete agreements between employers and workers (broadly defined to include employees, independent contractors, and others, whether paid or unpaid). The effective date of the final rule could be on or about August 23, 2024, depending on the success of legal challenges, which have already commenced. Continue Reading Federal Trade Commission Approves Final Rule Banning Nearly All Worker Non-Competes