In Texas, non-compete agreements are enforceable, but only under the conditions set by the Texas Covenants Not to Compete Act (Texas Business and Commerce Code Sections 15.50 through 15.52). The core rule: a non-compete is enforceable only if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made, and only to the extent that its limits on time, geographic area, and scope of activity are reasonable and do not impose a greater restraint than necessary to protect the employer's legitimate business interest (such as goodwill, trade secrets, or confidential information). Texas does not ban non-competes outright, and unlike California, North Dakota, Oklahoma, or Minnesota, it does not treat them as automatically void. Texas also does not currently have a statewide wage-based exemption that frees low-wage workers from non-competes.
How Texas's Non-Compete Rule Works
Two requirements must both be satisfied for a Texas non-compete to hold up.
1. It must be tied to an "otherwise enforceable agreement." A non-compete cannot stand on its own as a naked promise not to compete. It must be attached to a real, enforceable agreement between the parties. In practice, employers satisfy this by giving the employee something of value tied to the restriction, most commonly access to confidential information, trade secrets, specialized training, or client goodwill. The Texas Supreme Court confirmed in Alex Sheshunoff Management Services v. Johnson (2006) that the agreement can become enforceable when the employer later performs its promise (for example, by actually providing the confidential information), and in Marsh USA Inc. v. Cook (2011) that consideration reasonably related to the employer's interest in protecting goodwill, including stock options, can support a non-compete.
2. The restrictions must be reasonable. Section 15.50 requires that the limits on time, geographic area, and scope of activity be no broader than necessary. Texas courts routinely uphold time limits in the range of roughly one to two years and geographic limits tied to the territory where the employee actually worked or had customer contact. A restriction barring an employee from an entire industry nationwide, with no time limit, is the kind of overbroad term courts refuse to enforce as written.
Texas Courts Can Rewrite an Overbroad Non-Compete
This is one of the most important and surprising features of Texas law. Under Section 15.51(c), if a non-compete is unreasonably broad, a Texas court does not simply throw it out. Instead, the court is required to "reform" (rewrite) the agreement to make it reasonable, and then enforce the narrowed version. Reformation means a judge can shorten the time period, shrink the geographic area, or narrow the prohibited activities to whatever the court considers necessary to protect the employer.
There is, however, a meaningful protection for employees. If the agreement is reformed because the employer drafted it too broadly, the court generally may not award the employer damages for any conduct that occurred before the reformation, and may only grant injunctive relief going forward. This discourages employers from writing intentionally overbroad agreements to scare workers.
Special and Limited Exceptions in Texas
- Physicians. Section 15.50(b) sets out separate, stricter rules for non-competes against licensed physicians. Among other things, the agreement must allow the physician to buy out of the non-compete at a reasonable price (or one decided by arbitration), must give patients access to their medical records, and may not deny a physician the ability to continue treating patients with acute illness even after the contract ends.
- No general low-wage carve-out. Some states (such as Illinois, Washington, and Oregon) bar non-competes for workers earning under a set salary threshold. Texas has no equivalent statewide minimum-pay exemption, so non-competes can, in theory, apply to lower-wage workers, though courts still require a legitimate protectable interest and reasonable terms.
- At-will employment alone is not enough. A promise of continued at-will employment, by itself, generally does not make a non-compete enforceable. There must be a genuine exchange tied to the employer's protectable interest.
Recent Law Changes Workers Should Know
The biggest recent development came from the federal level, not Texas. In April 2024 the Federal Trade Commission issued a rule that would have banned most non-competes nationwide. But a federal court in Texas (in Ryan LLC v. FTC) set that rule aside in August 2024, blocking it from taking effect across the country. As a result, the FTC's non-compete ban is not in force, and Texas's own statute (Sections 15.50 to 15.52) continues to govern. If you have heard that non-competes are now illegal nationwide, that is not currently the law. Always confirm the latest status, because appeals and new federal or state legislation could change this.