On June 20, 2025, Texas Governor Greg Abbott signed Senate Bill 1318 (SB 1318) into law, enacting changes to Section 15.50 of the Texas Business and Commerce Code. The legislation introduces key modifications that are expected to impact how healthcare employment agreements—particularly those involving physicians and other healthcare providers—are structured within the state.
SB 1318 specifically addresses restrictive covenants, a common element in employment contracts that limits where and how a healthcare professional can work after leaving an employer. These covenants are often controversial and have been the subject of legal scrutiny when deemed overly broad or burdensome.
Under the newly amended statute, SB 1318 introduces clearer standards for the enforceability of non-compete clauses within healthcare employment contracts. The law aims to better balance employer interests in protecting proprietary information and patient relationships with the need for healthcare workers to maintain career mobility and ensure continued patient access to care.
Legal experts note that the legislation may affect how hospitals, clinics, and medical practices negotiate new contracts with physicians, nurses, and other licensed medical personnel. Employers may now need to revisit existing agreements to ensure compliance with the updated statutory provisions. Failure to do so could render certain restrictive terms unenforceable.
The bill was supported by various advocacy groups and professional organizations who argued that overly restrictive employment clauses were contributing to provider shortages, especially in underserved areas.
As Texas continues to face healthcare access challenges, particularly in rural communities, SB 1318 represents an effort to create a more flexible employment environment while maintaining legal safeguards for business interests.
The law will take effect on September 1, 2025. Employers and healthcare professionals are encouraged to consult legal counsel to understand the implications of the new legislation and adjust contract terms accordingly.
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