Non-Compete Agreements in Texas: What You Need to Know

Texas takes a middle-ground approach to non-compete agreements. Unlike California where they're essentially banned, Texas will enforce non-competes—but only if they meet specific statutory requirements. Understanding these requirements is crucial for both employers and employees.

The Texas Covenants Not to Compete Act

Texas Business and Commerce Code Section 15.50 governs non-compete agreements. Under this statute, a non-compete is enforceable only if it:

1. Is ancillary to an otherwise enforceable agreement
2. Contains reasonable limitations on time, geography, and scope
3. Does not impose greater restraint than necessary to protect legitimate business interests

The "Ancillary" Requirement Explained

This is where many Texas non-competes fail. The non-compete must be part of a larger agreement that gives you something of value. Courts have found this requirement satisfied when the non-compete is connected to:

• Access to confidential information or trade secrets
• Specialized training paid for by the employer
• Stock options or equity grants
• A legitimate business sale transaction

Critical point: Simply providing employment is NOT sufficient consideration in Texas. There must be a separate promise giving rise to the employer's interest in restraining competition.

Reasonableness Requirements

Time Limitations

Texas courts typically find these durations reasonable:

• 2 years or less: Generally reasonable
• 3-5 years: May be reasonable depending on circumstances
• More than 5 years: Increasingly difficult to enforce

Geographic Scope

Geographic restrictions must align with where you actually worked or the employer's legitimate market:

• Restrictions limited to territory where you worked are more likely upheld
• Nationwide restrictions are harder to justify unless you had nationwide responsibility
• Industry-specific limitations may substitute for geography in some cases

Scope of Activity

The restricted activities must be reasonably related to your actual job duties:

• Preventing you from working in your specific role: More likely enforceable
• Preventing you from any job at a competitor: Harder to justify
• Vague descriptions of prohibited activity: Less likely enforceable

Texas Courts Can "Reform" Overbroad Non-Competes

Here's a significant feature of Texas law: if a non-compete is overbroad, courts have the power to "reform" it to make it reasonable rather than striking it down entirely. This means:

• An employer's overbroad non-compete might still be partially enforced
• Courts can reduce the time period, narrow the geography, or limit the scope
• You shouldn't assume an unreasonable non-compete won't affect you at all

Specific Professions with Special Rules

Physicians

Texas has specific rules for physician non-competes under Section 15.50(b):

• Non-competes cannot prevent access to patient lists or records
• Physicians must be allowed to provide continuing care to patients
• Buyout provisions must be reasonable

Attorneys

Under Texas Disciplinary Rules, attorney non-competes that restrict the right to practice law are generally unethical and unenforceable.

What Texas Employers Need to Prove

To enforce a non-compete, Texas employers must demonstrate:

1. The agreement meets statutory requirements
2. You received legitimate consideration (not just employment)
3. The restrictions are reasonable
4. They have a legitimate business interest to protect
5. You actually violated or intend to violate the agreement

Your Rights as a Texas Employee

Before Signing:

• Negotiate narrower restrictions
• Ask what consideration you're receiving beyond employment
• Request specific definitions of "competitor" and "competitive activity"
• Seek a shorter duration and narrower geography

If You Want to Leave:

• Review your agreement carefully with an attorney
• Don't take confidential information or trade secrets
• Consider whether the non-compete meets all Texas requirements
• The new employer may be willing to help with legal costs

If Threatened with Enforcement:

• Respond carefully—don't admit violations
• Assess whether the agreement is truly enforceable
• Remember courts can reform rather than void the agreement
• Consider negotiating a release or reduced restrictions

Recent Developments and Trends

Texas courts continue to evolve their interpretation of non-compete law:

• Greater scrutiny of whether actual confidential information was shared
• Skepticism of non-competes in at-will employment without additional consideration
• Increased focus on whether restrictions actually protect legitimate interests

Conclusion

Texas non-competes are a double-edged sword. They can be enforceable, but they must meet specific requirements that many agreements fail to satisfy. If you're facing a non-compete issue in Texas, careful analysis of your specific agreement against the statutory requirements is essential.