Seller guide

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

States keep restricting physician non-competes. Most still allow one when you sell your practice, but not all, and the details matter.

Short answer

In most states that ban or limit physician non-competes, a non-compete you sign as the seller of your practice is still allowed, because the buyer is paying for your goodwill. Minnesota, California, Colorado, Indiana, Montana, Utah, Virginia, Oregon and Pennsylvania all keep some form of sale or ownership exception. Massachusetts and Texas are the ones to watch: their physician rules have no express sale exception. The federal FTC ban is dead.

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

StatePhysician ruleSale of a practice
MinnesotaNon-competes void since July 1, 2023Allowed when "agreed upon during the sale of a business," if reasonable in area and time
CaliforniaNon-competes generally voidAllowed for a seller of goodwill or all of an ownership interest (Bus. & Prof. Code §16601)
WashingtonAll non-competes void from June 30, 2027Allowed for a buyer or seller of an ownership interest of 1% or more
ColoradoCovenants restricting the practice of medicine void (2025)Sale exception kept, with a length cap for minority owners who received equity for services
IndianaRestricted for hospital-affiliated employers (2025)Allowed where the physician owned more than 50% of the business sold
OregonRestricted under SB 951 (2025)Ownership-based exceptions, around a 10% stake
PennsylvaniaEmployee covenants limited to 1 year (2025)Allowed in certain sales and changes of control
MontanaPhysician non-competes banned from January 1, 2026Limited exception for the sale or purchase of a practice
UtahHealthcare non-competes banned from May 6, 2026Allowed if related to a sale and the individual receives value from it
VirginiaHealth care professional non-competes banned for agreements from July 1, 2026Sale-of-business non-competes remain enforceable, per law firm analysis
MaineBanned for health care practitioners from July 29, 2026Does not apply to part owners of the employer
Texas1 year, 5 miles, buyout capped at annual pay (Sept 1, 2025)No express sale exception in the text
MassachusettsPhysician practice restrictions voidNo express sale exception in the text
FloridaSpecialty rule in §542.336; physicians excluded from the 2025 CHOICE ActGoverned by general Florida covenant law

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.

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Common questions

Can I be forced to sign a non-compete when I sell my practice?

A buyer can make it a condition of the deal, and in most states a seller covenant is allowed even where employee non-competes are banned. You can negotiate its length, radius and scope.

Does the Texas physician non-compete law apply when I sell my practice?

SB 1318 limits physician non-competes to one year, five miles and a buyout capped at annual pay, and its text has no sale-of-practice exception. Ask a Texas healthcare attorney how it applies to your deal.

Is the FTC non-compete ban in effect?

No. The rule was vacated in court, and in September 2025 the FTC dropped its appeals.

How is money paid for a non-compete taxed?

Payments for a covenant not to compete are ordinary income to the seller, while goodwill is generally taxed as a capital gain.

Related reading

Sources

Figures are attributed to their source and date. Ranges are published estimates, not a valuation of any practice.

  1. Federal Trade Commission, "Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule," September 5, 2025. Link
  2. Minnesota Statutes §181.988 (Office of the Revisor of Statutes). Link
  3. California Business and Professions Code §16601 (via Public.law). Link
  4. Washington State Legislature, ESHB 1155, Chapter 149, Laws of 2026 (approved March 23, 2026; effective June 30, 2027). Link
  5. Kutak Rock, "Summary of SB 25-083," July 30, 2025. Link
  6. Bricker Graydon Wyatt, "Indiana Non-Compete Regulation," May 15, 2025. Link
  7. Davis Wright Tremaine, "Oregon SB 951 Restricts Corporate Medical Practice," June 13, 2025. Link
  8. Duane Morris, "Pennsylvania's New Fair Contracting for Health Care Practitioners Act Limits Post-Employment Restrictions," July 26, 2024. Link
  9. Rubin Fortunato, "Montana Will Ring in 2026 With a Shiny and New Expansion of Its Non-Compete Ban," December 2, 2025. Link
  10. Epstein Becker Green, "Utah Bans Post-Employment Noncompetes for Healthcare Workers Effective May 6, 2026," March 2026. Link
  11. Rubin Fortunato, "Virginia Expands Its Ban on Non-Compete Agreements for Health Care Professionals," June 16, 2026. Link
  12. Covington, Inside Jobs, "Non-Compete Roundup Summer 2026," July 31, 2026. Link
  13. Texas Legislature, SB 1318 (89th Legislature), enrolled text, effective September 1, 2025. Link
  14. Jackson Walker, "Noncompete Restrictions in Healthcare," June 24, 2025. Link
  15. Massachusetts General Laws, Chapter 112, §12X (Massachusetts Legislature). Link
  16. Florida Statutes §542.336 (The Florida Senate). Link
  17. Jackson Lewis, "Florida's CHOICE Act Offers Employers Unprecedented Tools," May 27, 2025. Link
  18. Seyfarth Shaw, "A New Era of Health Care Noncompetes," September 28, 2026. Link
  19. The Tax Adviser (AICPA), "Handling tax issues related to noncompete agreements," May 1, 2021. Link