Bill Text: TX SB1534 | 2023-2024 | 88th Legislature | Engrossed

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Bill Title: Relating to restrictions on covenants not to compete for physicians and certain other health care practitioners.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Engrossed - Dead) 2023-05-18 - Reported favorably w/o amendment(s) [SB1534 Detail]

Download: Texas-2023-SB1534-Engrossed.html

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By: Schwertner S.B. No. 1534

A BILL TO BE ENTITLED
AN ACT
relating to restrictions on covenants not to compete for physicians
and certain other 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 Subsection
(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 terminated; and
(B) limit the geographical area subject to the
covenant to no more than:
(i) a five-mile radius, if more than half of
the area subject to the covenant is located in a county with a
population of 50,000 or more; or
(ii) a 10-mile radius, if more than half of
the area subject to the covenant is located in a county with a
population of less than 50,000.
(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 discharged without good cause. For purposes of
this subsection, "good cause" means a reasonable basis for
discharge of a physician from employment that is directly related
to the physician's conduct, including the physician's conduct on
the job or otherwise, job performance, and 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 against a health care
practitioner is not enforceable 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 contract or employment terminated; and
(3) limits the geographical area subject to the
covenant to no more than:
(A) a five-mile radius, if more than half of the
area subject to the covenant is located in a county with a
population of 50,000 or more; or
(B) a 10-mile radius, if more than half of the
area subject to the covenant is located in a county with a
population of less than 50,000.
(c) Notwithstanding any other law, a covenant not to compete
is void and unenforceable against a health care practitioner if the
health care practitioner is discharged without good cause. For
purposes of this subsection, "good cause" means a reasonable basis
for discharge of a health care practitioner from employment that is
directly related to the health care practitioner's conduct,
including the health care practitioner's conduct on the job or
otherwise, job performance, and employment record.
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, 2023.