Non-competes in Texas: when they hold up, when they fail, and what the FTC changed

Yes, if the covenant is reasonable and tied to a valid agreement

Texas enforces non-compete agreements, but only when they meet a statutory test. Under section 15.50 of the Texas Business and Commerce Code, a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made, and if its limits on time, geographic area and scope of activity are reasonable and do not impose a greater restraint than necessary to protect the goodwill or other business interest of the person it protects. A covenant that fails the reasonableness part is often rewritten by the court rather than thrown out entirely.

I handle disputes over the enforceability of covenants not to compete, trade secrets and confidentiality agreements, and I draft these provisions in company, buy-sell and employment documents. This guide is general information about how the law works. It is not advice on your agreement, and outcomes depend heavily on the specific language and facts. Talk to a licensed Texas attorney before you sign, enforce or breach one.

The two-part test, translated

The first part asks whether the non-compete is attached to an otherwise enforceable agreement. In plain terms, the covenant has to be part of a real bargain, and the employer or buyer must be giving something that justifies the restriction, such as access to confidential information, specialized training or the goodwill of a business being purchased. A bare promise not to compete, standing alone, is vulnerable.

The second part asks whether the restrictions are reasonable. Courts look at how long the restriction lasts, how large an area it covers and what activities it forbids, measured against the legitimate interest it protects. A restriction that bars a salesperson from contacting the specific customers they served is easier to defend than one that bars them from working in the industry anywhere in the state.

Reasonableness is measured case by case, which is why two clauses that look similar can fare differently. A restriction that fits a senior executive with access to strategy and pricing across a region may be excessive for a technician who serviced a handful of accounts in one part of Dallas. The more closely the clause matches what the person actually knew and did, the better its chances.

• Time: how long after the relationship ends the restriction applies
• Geography: where the person may not compete, ideally tied to where they actually worked
• Scope: which activities, customers or roles are restricted
• Interest protected: goodwill, confidential information or customer relationships, not simply avoiding competition

Courts can rewrite an overbroad non-compete

Texas has an unusual feature that matters to both sides. Under section 15.51, if a covenant is ancillary to an enforceable agreement but its time, area or scope limits are unreasonable, the court shall reform it to the extent necessary to make it reasonable and then enforce it as reformed. Employees who assume an overbroad clause is simply void may be surprised.

The same statute limits what an employer gets from an overbroad covenant. When a court has to reform it, the employer may not recover damages for breaches before the reformation, and relief is limited to an injunction. In certain cases involving personal services agreements, where the employer knew the restrictions were unreasonable and tried to enforce them beyond what was necessary, the court may award the employee the costs and attorney's fees of defending the case. Overreaching in the drafting can therefore cost an employer real money.

Who has to prove what

Section 15.51 also allocates the burden of proof. When the main purpose of the underlying agreement is to have someone perform personal services, as in most employment relationships, the party seeking to enforce the covenant must establish that it meets the statutory criteria. When the agreement has a different primary purpose, such as the sale of a business, the person resisting the covenant carries the burden of showing that it does not.

That distinction is one reason non-competes signed by owners selling a business tend to be treated differently from those signed by ordinary employees. A seller who received payment for the goodwill of the business is in a different position from an employee who signed a form on the first day of work.

Physicians and other health care practitioners have special rules

Section 15.50 has long included extra requirements for non-competes with physicians, such as access to patient lists and records, a buyout option, and continuing care for patients during an acute illness. Texas tightened those rules in 2025. According to a Haynes Boone client alert, the new law applies to covenants entered into or renewed on or after September 1, 2025, covers physicians and certain other practitioners including dentists, nurses and physician assistants, limits the restriction to one year after termination and a five-mile radius from the primary practice location, and caps the buyout at the practitioner's annual salary and wages at the time of termination.

If you are a health care practice owner or practitioner, older agreements, renewals and new hires may now fall under different rules. That is a reason to have current agreements reviewed rather than reusing an old template.

What happened to the federal non-compete ban

Many people remember headlines about a nationwide ban. The Federal Trade Commission issued a rule in 2024 that would have prohibited most non-competes, but a federal district court stopped the FTC from enforcing it. According to the FTC's own rule page, the Noncompete Rule is not in effect and it is not enforceable, and in September 2025 the FTC took steps to dismiss its appeal.

For Texas businesses, that means state law remains the main framework for deciding whether a non-compete is enforceable. Federal agencies can still pursue particular practices they consider unfair, so it is worth watching for developments, but the broad ban is not the law.

Check the date on anything you read about non-competes online, because a lot of commentary was written while the federal rule was pending.

Non-competes inside company and buy-sell agreements

In my formation and governance work, the non-competes that matter most are often between owners rather than between employer and employee. When a partner leaves, the remaining owners usually want assurance that the departing owner will not take the customers, the staff or the confidential information to a competing business. When an owner sells out, the buyer is paying for goodwill that a competing former owner could destroy.

These covenants belong in the company agreement or buy-sell agreement, drafted together with the buyout terms so that the restriction is clearly part of an enforceable bargain. They should be tailored to the business, the market and the owner's role. If you are a minority owner facing an exit, my guide on signs a minority owner is being squeezed out explains why it matters what your documents say before you leave.

Owners should also think about the reverse case. If you are the one likely to leave, a narrowly drawn covenant with a clear end date and a fair buyout price may be far better than a vague restriction that hangs over your next venture for years.

Drafting tips for employers that respect the statute

Employers do better with narrow, well-supported covenants than with sweeping ones. A clause the business can explain and defend is worth more than a clause that looks impressive and invites a fight.

• Tie the covenant to something real the employee receives, such as confidential information or specialized training
• Limit geography to where the employee actually worked or had customers
• Restrict specific activities or customers rather than an entire industry
• Keep the duration proportionate to how long the protected information stays valuable
• Pair the non-compete with confidentiality and non-solicitation terms
• Review templates regularly, especially for health care roles after the 2025 changes

If you signed one and want to leave, or someone you hired did

Read the agreement before you resign, not after. Identify exactly what it restricts, for how long and where, and gather the documents showing what you received when you signed it. Do not take customer lists, files or confidential information with you, even if you believe the non-compete is unenforceable; trade secret and confidentiality claims stand apart from the non-compete and can be serious on their own.

Employers hiring someone with a non-compete should ask for a copy and get advice before the person starts, because a new employer can be drawn into the dispute. If a demand letter arrives from a former employer, the guide on the first ten days after a demand letter or lawsuit is a useful checklist. Respond through counsel rather than with an angry email.

How I help on both sides of a non-compete

I represent businesses that want covenants drafted to hold up, owners negotiating restrictions as part of a buyout or sale, and parties in disputes over enforcement, confidentiality and trade secrets. My approach is the same in each: focus on the facts that will actually decide the matter, explain the realistic range of outcomes without promising one, and keep the cost proportionate to what is at stake.

I practice from One Campbell Centre in Dallas and handle matters in Texas state courts and in the federal courts of the Northern and Western Districts of Texas. If you are interviewing attorneys for a non-compete matter, my guide on questions to ask a business attorney before hiring will help you compare. Bring the agreement, the dates and a short summary of the situation, and I will tell you plainly how I read it.

Questions people ask me