Are Non-Compete Agreements Enforceable in Texas?

Whether a non-compete holds up in Texas is one of the questions covered in Texas employment law. Non-compete agreements, which the statute calls covenants not to compete, sit where contract law meets the state’s rules on restraint of trade. This article explains the statutory test for enforceability, what makes a restriction reasonable, what a court does with an agreement that reaches too far, and where the federal picture now stands.

The Texas test for enforceability

Texas enforces non-competes, but only ones that clear a statutory bar. Under Tex. Bus. & Com. Code § 15.50, a covenant not to compete is enforceable if two things are true. First, the covenant is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made. Second, it contains limits as to time, geographic area, and scope of activity to be restrained that are reasonable and impose no greater restraint than is necessary to protect the goodwill or other business interest of the employer.

Both parts matter. A promise not to compete that stands on its own, unconnected to any other enforceable agreement between the parties, does not meet the first requirement. And even a covenant tied to a valid agreement fails if its restrictions sweep wider than the employer’s legitimate interest. The statute frames enforceability as the rule for covenants that meet these conditions, not as a disfavored exception.

What makes time, area, and scope reasonable

Reasonableness is measured against the interest the employer is entitled to protect, such as trade secrets, confidential information, or customer goodwill. The statute sets no fixed ceiling on the number of months a restriction can last or the number of miles it can cover. Texas courts decide reasonableness on the facts of each case, weighing the restriction against the specific business interest behind it.

A restriction on the scope of activity generally has to match the work the employee actually did. A clause barring a former salesperson from any role in an entire industry, rather than from soliciting the customers they served, is the kind of overreach that draws judicial scrutiny.

The agreement a non-compete must be tied to

The first requirement, that the covenant be ancillary to an otherwise enforceable agreement, is where many Texas non-competes are won or lost. The Texas Supreme Court has read the statute to require that the consideration given by the employer give rise to the interest in restraining competition. In practice, that consideration is often the employer’s promise to provide confidential information or trade secrets, paired with the employee’s promise to protect them.

Continued at-will employment by itself is generally not the consideration that supports a covenant not to compete; the agreement the covenant is attached to has to create the protectable interest. Texas’s default employment rule is explained in at-will employment in Texas, and a non-compete is one of the contract terms that can sit on top of that at-will baseline without changing it. ## What a court does with an overbroad non-compete Texas does not treat an overbroad non-compete as void. Under Tex. Bus. & Com. Code § 15.51, if a covenant is ancillary to an otherwise enforceable agreement but its limits on time, area, or scope are unreasonable, the court must reform the covenant to make the limits reasonable and then enforce it as reformed. This power to rewrite, rather than strike, an overbroad clause is a defining feature of Texas law. Reformation comes with a trade-off for the employer. When a court has to narrow a covenant, it may not award the employer damages for any breach that happened before reformation, and the relief is limited to an injunction. Section 15.51 also allocates the burden of proof: when the agreement’s primary purpose is to obligate the employee to perform personal services, the employer must show the covenant meets the Section 15.50 criteria. And if the employer knew when the agreement was signed that the covenant was overbroad and still tried to enforce it beyond what was necessary, the court may award the employee the reasonable attorney’s fees spent defending the suit. A covenant can remain enforceable after the job ends, including when the employer is the one who ends it. That is a separate question from whether the termination itself was lawful, which is the subject of wrongful termination in Texas. ## Special rules and the law the statute overrides Physician non-competes carry extra conditions. Under Section 15.50(b), a covenant against a licensed physician is enforceable only if it lets the physician access a list of patients seen within one year of the contract ending, provides access to those patients’ medical records, allows the physician to buy out of the covenant at a reasonable price, and does not block continuing care during an acute illness. These requirements are set out in Tex. Bus. & Com. Code § 15.50. The statutory scheme also displaces older judge-made rules. Tex. Bus. & Com. Code § 15.52 makes the criteria in Section 15.50 and the procedures and remedies in Section 15.51 the exclusive standards for enforcing a covenant not to compete, preempting any competing common-law test. A Texas non-compete question therefore starts and ends with the statute. ## The federal non-compete rule and Texas In 2024, the Federal Trade Commission issued a rule intended to ban most non-compete agreements nationwide. That rule, the Non-Compete Clause Rule published at 89 Fed. Reg. 38342, was challenged in federal court and has not taken effect. Enforceability of a non-compete signed by a Texas worker continues to be governed by state law rather than the federal rule.