Non-competes in health care

Rachel V. Rose, JD, MBA

It’s been a busy couple of months for state and federal governments in the area of non-competes in health care.

In June 2025, Texas Governor signed S.B. 1318, which refines what is reasonable in terms of time, scope and duration for physicians, dentists, nurses and physicians assistants (“Medical Professional(s)”) after September 1, 2025. Those entered into before the effective date, will need to be renegotiated or litigated in the event an issue arises. The new Texas law includes the following items:

• One year maximum duration, effective from either the termination of employment or organic termination of the contract.
• The geographic scope is limited to a five-mile radius from the physician’s primary practice location.
• A mandatory buyout option must be included.
• If a Medical Professional is involuntarily terminated without “good cause” then the non-compete is automatically void.
• The express language in the contract must be clear and prominent.

It is also a good reminder for practices and physicians alike that the patient has the ultimate choice of provider and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) applies. An exiting provider may not take a list of patients from the practice. On the flip side, the practice must let patients know where the physician went, especially if they are in the same geographic area and copies of their medical records must be provided. The Harris County Medical Society provides a good synopsis of the Texas Medical Board Rules and Requirements.

Switching gears to the Federal Trade Commission (FTC), some readers may recall the August 2024 opinion from a Northern District of Texas United States District Court finding that the FTC exceeded its statutory authority in a final rule that banned nearly all noncompete clauses in employment agreements. See Ryan LLC v. Federal Trade Commission, No. 3:24-CV-00986-E (N.D. Tex. Aug. 20, 2024). Now, as illustrated in a letter to an unknown health care entity, the FTC is focused on unearthing “unlawful noncompetes, particularly in the health care sector.”

Invoking its authority under Section 5 of the FTC Act (15 U.S.C. §45) to investigate and enforcement restraints of trade that have anti-competitive purposes. As FTC Chairman Ferguson stated, “I encourage you to conduct a comprehensive review of your employment agreements – including any noncompetes or other restrictive covenants – to ensure that they comply with applicable laws and are appropriately tailored to the circumstances.”

Chairman Ferguson’s words offer sage advice. In light of both Texas S.B. 1318 and the FTC’s focus on the health care sector, ensuring that non-competes and other related clauses are reasonable in time, scope and duration, as well as other relevant factors, including pro-competition, are compliant is a prudent step for health care providers and employers alike.