Texas Governor Signs Host of Bills Impacting Employment

Biennially, the Texas Legislature convenes from mid-January to June, to introduce, debate, and pass new laws impacting Texans across the state. Texas Governor Greg Abbott’s deadline to sign pending bills passed on June 22, 2025, the end of the 89th Texas Legislative Regular Session. Below is a summary of key new Texas laws impacting employers and businesses. 

Texas Artificial Intelligence Law 

Following a growing number of states, the Texas Legislature passed HB 149, the Texas Responsible Artificial Intelligence Governance Act (“TRAIGA 2.0”). The Act establishes a patchwork regulatory framework for artificial intelligence systems within Texas, including an AI Regulatory Sandbox Program to test innovative AI systems and a Texas Artificial Intelligence Counsel charged with ensuring ethical use of the technology.

Texas opted to adopt lean AI regulations focusing almost entirely on state government’s development and use of AI systems. As opposed to the original version of the bill, TRAIGA 2.0 imposes no requirement that private employers disclose their use of AI to make or aid in employment-related decisions to employees or job applicants. In fact, the law generally is silent on the duties, requirements, and expectations in employment and commercial contexts. However, this new AI bill prohibits the development and deployment of AI systems that intentionally discriminate against a protected class in violation of state or federal law. Unlike anti-discrimination provisions in the Texas Labor Code, however, the AI bill does not create a private cause of action. Instead, the Texas Office of the Attorney General has exclusive authority to enforce the law. 

See Texas Joins the Fray and Enacts AI Legislation for a comprehensive overview of new AI legislation in Texas. 

Ban on Nondisclosure and Confidentiality Provisions for Claims of Sexual Assault

SB 835 makes non-disclosure and confidentiality provisions of any agreement, including employment and settlement agreements, void and unenforceable to the extent the agreement prohibits a person from disclosing an act of sexual abuse or facts related to sexual abuse of another person. While non-disclosure and confidentiality provisions cannot encompass sexual abuse, the law clarifies that parties to agreements can continue to agree to keep confidential any other provision of a settlement agreement, including the amount of payment terms of settlement. Sexual abuse is precisely defined to include the following conduct:

• Abuse of a child as defined in Section 261.001(1)(E), (F), (G), (H), (K), or (L), Family Code; or
• One or more of the following penal laws:
  • indecency with a child under Section 21.11, Penal Code;
  • sexual assault under Section 22.011, Penal Code;
  • aggravated sexual assault under Section 22.021, Penal Code;
  • sexual performance by a child under Section 43.25, Penal Code;
  • trafficking of persons under Section 20A.02(a)(3), (4), (7), or (8), Penal Code; and
  • compelling prostitution under Section 43.05, Penal Code.

Importantly, unless a party seeks a declaratory judgment and is granted a court order permitting nondisclosure of the sexual abuse, this prohibition applies retroactively to all agreements that were entered into before the effective date of this law, September 1, 2025.  

When drafting employment and settlement agreements, employers will need to be mindful to clearly delineate the scope of any non-disclosure and confidentiality provisions so as not to run afoul of the new prohibitions. 

Hospital Report & Complaint Process for Nurse Staffing Concerns

To address nurse staffing problems in Texas hospitals,¹ HB 2187 requires the Texas Department of State Health Services (DSHS) to provide the Texas Health and Human Services Commission (HHSC) with a hospital’s annual nurse staffing report, and each hospital’s chief nursing officer must attest to the accuracy of the information in the report. The bill also requires that HHSC establish a process to promptly review and resolve complaints submitted under the nurse staffing chapter of the Texas Health and Safety Code, which includes prohibitions against retaliation for any nurse who provides information to the hospital’s nurse staffing committee or who reports violations under the bill. This new law takes effect September 1, 2025. By December 31, 2025, the HHSC executive commissioner must adopt rules necessary to implement the new law. 

Health care employers operating hospitals should ensure the chief nursing officer, or equivalent role, prepares to satisfy this new requirement and has protocols in place to ensure the accuracy of information shared. 

Restrictions on Non-Competes for Physicians and other Health Care Practitioners

SB 1318 changes the guardrails for physician covenants not to compete and adds new set of limitations for a select group of other health care practitioners.

Physicians

The new law makes these changes to the existing rules for physicians (individuals licensed to practice medicine by the Texas Medical Board):

• Replaces the existing buyout requirement for physicians in the Texas non-compete statute based upon a “reasonable price” with a buyout amount that must be no larger than the equivalent of one year of the physician’s annual salary and wages at the time of employment or contract termination;
• Adds a time limit that the post-employment covenant not to compete extends no longer than one year after the date the contract or employment terminated.
• Adds a specific provision that the geographic coverage of the covenant cannot exceed a five-mile radius from the location where the physician primarily practiced before the contract or employment terminated, replacing the previous, more flexible, reasonableness standard.

These standards apply only to covenants restricting the practice of medicine and do not apply to managing or directing medical services in an administrative capacity. 

The new law also provides that for physicians (not the health care practitioners discussed and defined below) a covenant not to compete relating to the practice of medicine is void and unenforceable if the physician is involuntarily discharged from the contract or employment without good cause. For purposes of this subsection, "good cause" means 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.

Health Care Practitioners

Under this new law, an enforceable covenant not to compete clause with a covered "health care practitioner" (meaning a Texas state licensed dentist, professional or vocational nurse, or physician’s assistant) must contain:

• A provision allowing the buyout of the covenant by the health care practitioner in an amount no greater than the practitioner's total annual salary and wages at the time of termination of the practitioner's contract or employment;
• A restriction that expires no later than one year after the date the contract or employment has been terminated; and
• A restriction limited to a geographical area no larger than a five-mile radius from the location where the health care practitioner primarily practiced before the contract or employment terminated, as specified in the covenant. 

For both physicians and health care practitioners, the new law adds language to avoid any ambiguity about oral agreements or modifications. The covenant not to compete must have “terms and conditions that are clearly and conspicuously stated in writing.” 

This new law applies only to covenants not to compete entered in to or renewed after the bill’s September 1, 2025 effective date. 

New Regulations for Delivery Network Companies 

HB 4215 outlines new regulatory and operational requirements for delivery network companies, defined as a business entity that offers or uses a digital network to arrange for the delivery of food, beverages, or consumer goods from a restaurant or retail establishment to a delivery customer.² Effective September 1, 2025, delivery network companies are required to comply with the statutory provisions applicable to transportation network companies, including that a delivery network company must obtain a permit from the Texas Department of Licensing and Regulation, pay a required fee, and implement various policies and procedures in order to operate in the state. These procedures include requiring certain minimum qualifications for individuals accessing the company’s digital network, including that they be at least 18 years of age, have a valid government-issued photo ID or valid driver license, and that the individual pass a criminal background check and a review of their driving record. Under the new law, delivery network companies must adopt an intoxicating substance policy and nondiscrimination policy prohibiting a delivery person on the company’s digital network from any amount of intoxication or from discriminating against a customer or potential customer based on their geographic location, destination, race, color, national origin, religious belief, or affiliation, sex, disability, or age. Other provisions in the new law concern permitting requirements, fees, recordkeeping requirements, passenger disclosure and data sharing. 

HB 4215 also prescribes when a delivery person can be considered an independent contractor, requiring that the company and delivery person agree to contractor status in writing, and that the company not:

• Prescribe specific hours during which the delivery person is required to be logged in to the company’s digital network;
• Impose restrictions on the delivery person’s ability to use other delivery network companies’ digital networks;
• Prescribe the territory within which the delivery person can provide deliveries; or
• Restrict the delivery person from engaging in another occupation or business.

Employers that qualify as “delivery network companies” should audit their employer practices to ensure compliance with this new framework. Non-compliance with these new rules could result in suspension or revocation of a company’s permit by the Texas Department of Licensing and Regulation. 

Human Trafficking Workplace Training for Emergency Medical Personnel & Medical Assistants

Effective September 1, 2025, two bills will expand the occupational groups required to successfully complete a training course on identifying, assisting, and reporting victims of human trafficking. 

HB 742 expands this training to first responders, including fire protection personnel and emergency medical services personnel. A first responder is defined as a public safety employee whose duties include responding rapidly to an emergency, including volunteer personnel, and a peace or reserve law enforcement officer performing law enforcement duties. 

HB 754 requires the same human trafficking training for medical assistants, defined as any individual who, under the supervision of a physician, assists with patient care management, executes administrative duties, and performs certain clinical procedures. 

The training bills also establish human trafficking signage requirements for hospitals, hospitals’ emergency departments, freestanding emergency medical care facilities, ambulatory surgical centers, public health clinics, birthing centers, outpatient clinics, and community health centers, and include anti-retaliation provisions prohibiting employers from disciplining or retaliating against any hospital employee who makes a good-faith report of suspected human trafficking. 

The HHSC Executive Commissioner is responsible for approving and posting to HHSC’s website the list of approved human trafficking prevention training resources “as soon as practicable after the September 1, 2025 effective date.” The attorney general is charged with designing mandatory signage “as soon as practicable” after the September 1, 2025 effective date.

Grace Period for Professional Employer Organizations’ License Renewal

SB 1254 revised certain licensing and enforcement requirements applicable to professional employer organizations (PEOs).  The bill amends the definition of “license holder” to mean a person holding a license issued by the Texas Department of Licensing and Regulation (TDLR). In the past, if a PEO failed to make a timely application for license renewal, its status as a co-employer was unclear under the Labor Code. Under the new law, if a PEO fails to apply for a license renewal within 18 months of license expiration, its employer status terminates, and the TDLR can take disciplinary action against the PEO is if it engages in or offers services with an expired license. This change takes effect September 1, 2025. 

Amendments to Unemployment Claim Definitions

Effective January 1, 2026, HB 3699 amends Section 208.002(a) of the Texas Unemployment Compensation Act to clarify the meaning of the terms “last work” and “person for whom the claimant last worked.” Specifically, these terms will refer to the employer for whom the claimant last worked, unless otherwise specified by state or federal law, removing current provisions that refer to the last person for whom the claimant worked at least 30 hours in a week. This change in statutory definition resulted from concerns that the prior definition allowed claimants to qualify for unemployment benefits improperly, by creating a new prior employer when the separation from their actual last employer would be disqualifying. For example, an individual might work for a neighbor for 30 hours and claim the individual was laid off due to a lack of work. 

Without requiring any action by employers, this important clarification should reduce fraud in securing benefits. 

Texas Health Care Plan Coverage of Reproductive Health

SB 1257 amends the Texas Insurance Code to mandate that health benefit plans that cover transition-related coverage extend that coverage to include follow-up care, adverse effect management, and other related treatments. This new law applies to any health benefit plan that provides benefits for medical or surgical expenses or pharmacy benefits incurred as a result of a health condition, accident, or sickness, including an individual, group, blanket, or franchise insurance policy or insurance agreement, a group hospital service contract, or an individual or group evidence of coverage or other similar coverage document as outlined in the Insurance Code. 

This law goes into effect on September 1, 2025. 

Amends the Definition of Sex

HB 229 requires governmental entities that collect vital statistics information, including sex, to identify individuals as either male or female.³ In particular, the bill amended the Texas Code Construction Act under the Government Code, which provides rules for interpreting and applying statutes like the Texas Labor Code, defining  “sex” as “an individual’s biological sex, either male or female” and “male” and “female” as based on reproductive organs. The potentially wide-reaching implication of this definitional change is unclear. While Title VII still defines sex to include gender identity, this new restricted definition of sex may impact transgender, intersex, and gender fluid individuals’ ability to use “sex” as the basis for protection under state anti-discrimination laws. 

These new definitions and information collection requirements are effective September 1, 2025. 

Cybersecurity Program & Defense Against Punitive Damages

Effective September 1, 2025, SB 2610 does not create a new private right of action, but does impose limits the scope of damages that a person can recover from certain business entities operating in Texas. Specifically, the new law prohibits a person harmed from a breach of a system security from recovering exemplary damages, including punitive damages, in an action arising from a security breach when a business entity in Texas meets certain criteria: 

• Fewer than 250 employees;
• Owns or licenses computerized data that includes sensitive personal information; and
• At the time of the breach, the entity implemented and maintained a Cybersecurity program meeting certain criteria. 

Qualifying Cybersecurity programs must have administrative, technical, and physical safeguards for the protection of personal identifying information and sensitive personal information; conform to an industry-recognized cybersecurity framework; be designed to protect against discreet cybersecurity concerns; and meet scale and scope requirement commensurate with the size of the business entity. 

Companies should review their Cybersecurity programs carefully to ensure they reap the protections of this law in face of litigation relating to a cybersecurity breach.