Physician Non-Competes After Selling Your Practice: 2026 State Rules

Why buyers ask for a non-compete

A buyer is paying for your patients, referral sources and reputation. If you could open a new office across the street, that goodwill would walk out the door. So almost every practice sale includes a covenant not to compete, usually limited by distance and years.

The law treats a seller's covenant differently from an employee's. An employee non-compete limits someone's ability to earn a living. A sale covenant protects what the buyer just paid for. That is why most state bans include an exception for the sale of a business.

Two agreements, two sets of rules

When you sell, you often sign two restrictions:

• The sale covenant in the purchase agreement, tied to the price you receive.
• An employment non-compete in your new employment agreement with the buyer, if you keep practicing.

The employment restriction is the one most new state laws target. A covenant that is valid as part of the sale may not save an employment non-compete in the same deal.

The federal picture

The FTC's 2024 rule banning most non-competes never took effect. In September 2025, the FTC moved to dismiss its appeals and accept the court ruling that vacated the rule. Non-competes are a state-law question again.

State rules for selling physicians

Exceptions in Colorado, Indiana, Oregon, Pennsylvania, Montana, Utah, Virginia and Maine are summarized from law firm analysis, not quoted from statute. Read the statute in your state with your attorney.

Texas and Massachusetts need extra care

Texas. SB 1318 took effect September 1, 2025, for covenants signed or renewed after that date. A physician non-compete must expire within one year, cover no more than five miles from where the physician primarily practiced, and allow a buyout no greater than the physician's annual salary and wages. The text has no carve-out for a practice sale. Jackson Walker reads it as changing the non-competes "commonly included in the sale of a medical practice." If you sell in Texas, assume your covenant may need to meet those limits unless your attorney advises otherwise.

Massachusetts. M.G.L. c. 112 §12X voids restrictions on a physician's right to practice after a partnership, employment or other professional relationship ends. The statute has no express exception for a sale. How courts treat a seller's covenant there is unsettled, so structure it with counsel.

Florida. Physicians are excluded from the 2025 CHOICE Act. Separately, §542.336 voids a specialty physician's covenant in a county where one entity employs or contracts with every physician in that specialty, until three years after a second entity begins offering it.

What to negotiate

• Radius. Tie it to where your patients actually come from, not a round number.
• Length. Shorter is better for you. Sale covenants commonly run longer than employment ones, and courts look at reasonableness.
• What counts as competing. Carve out teaching, telehealth, locum work, charity care or a different specialty if you plan to do any of it.
• What ends it. Ask that the employment non-compete fall away if the buyer ends your employment without cause.
• Price allocation. Money allocated to the non-compete is ordinary income to you, while goodwill is generally a capital gain. See taxes when selling a medical practice.

This guide is general information, not legal advice. Non-compete law is changing state by state, so have a healthcare attorney review your covenant before you sign.

Common questions

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