Texas Legislation & Compliance

Texas Legislation & Compliance

Under the Texas Covenants Not to Compete Act, courts are required — not permitted — to rewrite overbroad non-compete agreements rather than void them, a rule that carries consequences for both employers and employees. The statute mandates that courts reform unreasonable restrictions on time, geographic area, or scope of activity to the extent necessary to make them enforceable, and then enforce the agreement as rewritten — a process courts apply at every stage of litigation, including temporary injunction proceedings. Courts most frequently reform geographic scope and activity restrictions, tying geography to the territory where the employee actually worked and limiting activity restrictions to roles substantially similar to the employee’s prior position, as seen in Hipps v. CBRE, Inc. (2024) and Galderma Laboratories, L.P. v. Brenner (2026). When a court is forced to reform an overbroad agreement, the employer loses the right to recover attorneys’ fees and cannot pursue financial damages for breaches that occurred before the rewrite, leaving injunctive relief as the only available remedy. Reformation is not available when the underlying agreement is unenforceable, lacks adequate consideration, or when the non-compete has already expired. Source: Hendershot Cowart P.C.

Texas HB 4224 requires covered healthcare entities to post instructions in two locations — on their website and at each physical facility — telling patients how to request medical records, contact the applicable licensing or disciplinary authority, and file a consumer complaint under Texas Health and Safety Code Section 181.103. The law, which passed the Texas House 149-0 and the Texas Senate 31-0, applies to any person or entity that assembles, collects, stores, transmits, or otherwise handles protected health information, including physicians, hospitals, clinics, mental health providers, and staffing agencies. Entities that exclusively perform claims processing, data processing, utilization review, or billing on behalf of another provider are exempt, but lose that exemption if they also provide direct patient-facing services. The postings must give step-by-step instructions — not merely a statement of rights — and a HIPAA Notice of Privacy Practices alone does not satisfy the requirement. Non-compliance does not create new criminal liability but can trigger investigations by the Texas Attorney General’s office or a provider’s licensing board. Source: Hendershot Cowart P.C.

Texas Senate Bill 2544 requires out-of-network facility providers — hospitals, ambulatory surgery centers, freestanding emergency rooms, and birthing centers — to request mediation within 180 days of receiving an initial payment for a disputed service or forfeit the right to mediation and any civil action to recover the disputed amount. The law amends Texas Insurance Code Chapter 1467, which already required completion of Texas Department of Insurance mediation before filing suit, but previously set no deadline to initiate that process. The 180-day rule applies to disputes with TDI-regulated commercial health benefit plans and self-insured ERISA plans that have opted into the Chapter 1467 process, but does not cover Medicare, Medicaid, or ERISA plans that have not opted in. The deadline mirrors the existing 90-day arbitration window that already governed out-of-network non-facility providers such as physicians and physician groups under the same framework. The legislature’s stated intent was to create a consistent, time-limited dispute resolution system and eliminate the practice of filing batches of stale claims years after services were rendered. Source: Hendershot Cowart P.C.