Texas Gov. Greg Abbott has signed a bill that would place stricter limitations on restrictive covenants in employment contracts for physicians and other healthcare practitioners, according to a June 26 blog post by Chicago-based law firm Jackson Lewis.
Here are six things to know about the new restrictions:
1. The new law goes into effect Sept. 1 and applies to noncompete agreements entered or renewed on or after the effective date.
2. The new law limits geographic restrictions to a five-mile radius from a physician’s former employer.
3. Noncompete agreements signed or renewed after Sept. 1 will have a one-year expiration date.
4. Buyout provisions, which allow a physician to pay to get out of their noncompete, are capped at the physician’s total annual salary and wages at the time they leave their employer, clarifying previous restrictions that were defined by a “reasonable price” standard.
5. Under the new law, terms and conditions of noncompete agreements must be stated “clearly and conspicuously” in writing.
6. Noncompetes are void and unenforceable if the physician is terminated without “good cause,” defined as “a reasonable basis related to the physician’s conduct, job performance or contract record.”
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