Overview
2025 has been a busy year for new state legislation on employee restrictive covenant agreements, particularly in the healthcare sector. While several states have pushed forward new legislation restricting employee restrictive covenant agreements, Florida bucks the trend.
This patchwork of state-specific laws creates a complex landscape for employers, making it increasingly challenging to navigate and comply with the varying regulations across different states. For businesses operating in multiple states, this can mean significant legal and operational hurdles, as they must tailor their employment contracts and practices to meet the unique requirements of each jurisdiction. Despite these challenges, understanding and adapting to these changes is crucial for maintaining compliance and protecting business interests.
In Depth
Florida
While most states have moved to further limit noncompete agreements, the Sunshine State took a clear step in the opposite direction when the Florida Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth Act (dubbed the “CHOICE Act”) went into effect on July 1, 2025.
The CHOICE Act applies to employees who earn a salary that is the greater of either twice the annual median wage (i) of the Florida county in which the employer has its principal place of business or (ii) where the employee or contractor resides, if the employer’s principal place of business is outside of Florida. (Note: the CHOICE Act does not apply to “health care practitioners” as defined in Section 456.001 of the Florida statutes). Chapter 542 of the Florida statutes already contains a comprehensive set of rules favoring enforceability of noncompetes so long as they are reasonable in time, duration, and scope. The CHOICE Act mostly supplements this existing structure by allowing employers to restrict competition in two respects:
- Under a covered garden leave agreement, an employer may use a “garden leave” arrangement to effectively terminate an employee but retain them long enough to prevent them from joining a competitor. Under this arrangement, the employee is not required to perform any work for the employer and still receives the same salary and benefits for up to four years in exchange for the employee’s promise not to work for another employer without employer approval. The post-employment period under a garden leave agreement is often referred to as the “notice” period.
- Under a covered noncompete agreement, an employer may use a noncompete agreement lasting no more than four years to restrict a former employee from working for a competitor. This is a slight change from Chapter 542, which provides that an employment-related noncompete (versus a sale-of-business noncompete) is presumptively unreasonable if it lasts more than two years.
For both sets of agreements, the CHOICE Act requires certain prerequisites for enforceability. Namely, they both must be in writing and advise the employee of the right to counsel with at least seven days to review the agreement before signing, and the employee must acknowledge in writing that they received confidential information or were responsible for substantial client relationships during the term of their employment.
A covered garden leave agreement must also state that (i) the employee does not have to work beyond the first 90 days of the notice period; (ii) the employee may engage in non-work activities during the remainder of the notice period; (iii) the employee may work for another employer with the employer’s permission during the notice period; and (iv) the notice period may be reduced if the employer provides at least 30 days’ advanced notice in writing.
A covered noncompete agreement must additionally state that the noncompete duration is reduced day-for-day by any non-working portion of a covered garden agreement’s notice period. Essentially, if an employer requires an employee to sign both a noncompete and a garden leave agreement, the noncompete must specifically state that its duration is reduced by the overlapping days between the noncompete and the garden leave agreement.
To enforce these agreements, the CHOICE Act makes it easier for employers to seek injunctive relief; courts must issue an injunction unless the employee can demonstrate by clear and convincing evidence that the agreement does not apply or the employer failed to pay consideration for the agreement.
Employers expecting to enter into noncompete agreements, particularly with healthcare employees, should work with counsel to understand the state-specific limitations and requirements.
Maryland
Maryland House Bill 1388 (HB 1388), which went into effect on July 1, 2025, bans noncompetes with certain healthcare workers and limits such agreements under specific circumstances.
- The law voids noncompetes entered into on or after July 1, 2025, with healthcare professionals earning $350,000 per year or less.
- The law restricts noncompetes entered into on or after July 1, 2025, with healthcare professionals earning more than $350,000 to a duration of one-year post-employment and a 10-mile radius from the professional’s primary place of employment. The law does not define the “primary place of employment.”
- Employers must provide the new location of a former employee if a patient requests it.
- Healthcare professionals, for the purposes of this law, include anyone required to be licensed under the Health Occupations Article who is employed in a position that provides direct patient care.
Texas
The Lone Star State amended certain provisions of the Texas Business and Commerce Code to narrow the scope of enforceable noncompete agreements against certain medical practitioners. The new law, effective September 1, 2025, applies to physicians licensed by the Texas Medical Board and certain “healthcare practitioners” (specifically licensed dentists, vocational nurses, and physician assistants).
One physician-specific limitation is that noncompetes can only be enforced against licensed physicians that are terminated for good cause. The law defines good cause as “a reasonable basis for discharge of a physician from contract or employment that is directly related to the physician’s conduct, including the physician’s conduct on the job or otherwise, job performance, and contract or employment record.” The new law also carves out “managing or directing medical services in an administrative capacity for a medical practice or other healthcare provider” from the definition of the “practice of medicine,” meaning that noncompetes against those in a managerial position are likely not subject to the new law’s requirements.
Any noncompete must be in clear writing and provide for a “buy out” that is no greater than the practitioner’s total annual salary and wages at the time of termination. Prior Texas law provided that the buy out must be at a “reasonable price.”
As for scope, the new law states that an enforceable restrictive covenant (i) cannot last more than one year and (ii) must be limited to a radius of no greater than five miles from where the practitioner “primarily practiced” before termination.
Nevada
Nevada Senate Bill 378 (NV SB378) was delivered to Governor Joe Lombardo on June 5, 2025, but was vetoed and sent back the legislature. If enacted, the law would have banned noncompetes entered into by any employee who is a “patient-facing provider of health care,” which is defined to include any provider (i) whose primary duties involve providing clinical care to patients and (ii) who is not employed or contracted to primarily perform administrative tasks.
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Employers expecting to enter into noncompete agreements, particularly with healthcare employees, should work with counsel to understand the state-specific limitations and requirements. McDermott will continue to monitor developments in this rapidly changing area of the law.
