SB 1318 After One Year: Health-Care Noncompetes and Trade Secrets
Texas limits certain health-care noncompetes entered into or renewed on or after September 1, 2025. The changes affect duration, geographic scope and buyouts, while trade-secret and confidentiality protections remain separate.
What SB 1318 did.
Senate Bill 1318, passed by the 89th Texas Legislature and signed June 20, 2025, rewrites the rules for health-care noncompetes in two ways. First, it amends Section 15.50 of the Texas Business and Commerce Code (the physician-noncompete provision) so that a physician covenant governed by the amendments must expire no later than one year after termination, cover no more than a five-mile radius from the primary practice site, be clearly and conspicuously stated in writing, and be voidable by the physician's payment of a buyout capped at the physician's total annual salary and wages at the time of termination. The old regime's "reasonable price," sometimes set by an arbitrator, is gone. The statute also keeps the earlier requirements: access to the patient list and medical records, and no prohibition on continuing care for a specific patient during an acute illness.
Second, it adds a new Section 15.501 applying the same four requirements (capped buyout, one-year maximum, five-mile radius, clearly and conspicuously in writing) to noncompetes with "health care practitioners" as the statute defines them: dentists licensed by the State Board of Dental Examiners, nurses licensed under Chapter 301 of the Occupations Code (professional or vocational nursing), and physician assistants licensed under Chapter 204. A practitioner covenant that fails these requirements is not enforceable. The involuntary-discharge and administrative-capacity rules apply only to physician covenants under §15.50, not to practitioners under §15.501. The amendments apply to covenants entered into or renewed on or after September 1, 2025; existing covenants remain governed by prior law.
Two further rules apply only to physicians. New §15.50(b-1) provides that the "practice of medicine" does not include managing or directing medical services in an administrative capacity. Covenants with physicians acting solely in administrative or management roles fall outside the physician provision. And new §15.50(d) makes a physician covenant void and unenforceable if the physician is involuntarily discharged without good cause, defined as a reasonable basis for discharge directly related to the physician's conduct, including job performance and the contract or employment record.
Why it matters for trade secrets.
Noncompetes and trade secret law serve related purposes. A noncompete restricts where a former employee may work; trade secret law protects the information itself. SB 1318 narrows noncompetes but does not change the Texas Uniform Trade Secrets Act or the enforceability of confidentiality and nondisclosure agreements.
A health-care business that relied on broad noncompetes to protect its protocols, referral relationships, and operational know-how now depends more on trade secret protection: identifying the information, limiting access to it, requiring confidentiality agreements, and enforcing them.
Practical considerations.
- Existing covenants. The new requirements apply to covenants entered into or renewed on or after September 1, 2025. Earlier covenants remain subject to prior law unless renewed. A covenant that does not satisfy the applicable statutory requirements raises an enforceability problem; any argument for judicial reformation requires separate analysis of the governing provisions and the particular defect.
- Confidentiality agreements. With noncompetes limited, confidentiality agreements carry more weight. Agreements that identify the specific confidential information tend to be more useful than blanket provisions.
- Trade secret practices. Access controls, need-to-know restrictions, exit interviews, prompt removal of access, and written reminders of confidentiality obligations are the kinds of reasonable measures a misappropriation claim depends on.
- Renewals. Covenants entered into before September 1, 2025 remain under prior law, but a renewal brings them under the new limits.
- Physician-specific rules. For physicians, a covenant is also void if the physician is involuntarily discharged without good cause, and the physician provisions do not apply to physicians acting solely in administrative or management roles.
What to watch.
How courts interpret "good cause" in the involuntary-discharge context, and how they apply the administrative-capacity exclusion to physician-executives who also practice; how courts address requests to reform covenants that do not satisfy the new requirements; and whether other states' legislatures follow Texas in extending noncompete limits to nurses and physician assistants.
Sources.
- Tex. S.B. 1318, 89th Leg., R.S. (2025) (enrolled text), amending Tex. Bus. & Com. Code § 15.50 and adding § 15.501. capitol.texas.gov (retrieved September 30, 2026).
- Texas Legislature Online, 89(R) History for SB 1318: signed by the Governor 06/20/2025; effective 9/1/25. capitol.texas.gov (retrieved September 30, 2026).
- Tex. Bus. & Com. Code §§ 15.50, 15.501, 15.52: covenants not to compete. statutes.capitol.texas.gov (retrieved September 30, 2026).
This article is general information, not legal advice. Law checked through September 30, 2026. See the Disclaimer.