Is My Non-Compete Enforceable in Texas?

What makes a non-compete enforceable in Texas

Texas is not a state that refuses to enforce non-competes. It enforces them under a statute, the Covenants Not to Compete Act, Texas Business and Commerce Code sections 15.50 to 15.52. Section 15.50(a) sets a two-part test, and section 15.52 says that test is the only one: common-law arguments about whether a covenant is fair do not add to it or subtract from it.

The two parts are:

1. The covenant must be ancillary to or part of an otherwise enforceable agreement at the time it is made.
2. Its limitations as to time, geographic area and scope of activity must be reasonable and must not impose a greater restraint than necessary to protect the goodwill or other business interest of the employer.

Each part has its own body of case law, and an employer who wants to know whether a particular agreement will hold needs to walk through both.

Part one: was there an otherwise enforceable agreement?

The first part trips up more agreements than owners expect. At-will employment by itself is not an “otherwise enforceable agreement,” because either side can end it at any moment. Something more has to be exchanged for the employee's promise not to compete, and that something has to be reasonably related to the interest the non-compete protects.

The Texas Supreme Court has filled in what that means. In Alex Sheshunoff Management Services v. Johnson (2006), the court held that an employer's promise to provide confidential information, kept by actually providing it after signing, supports a non-compete even when the employee is at will. The covenant becomes enforceable once the employer performs; the paperwork does not have to be perfect on day one. In Marsh USA Inc. v. Cook (2011), the court held that stock options granted to a key employee were enough, because an ownership stake is reasonably related to protecting the company's goodwill.

What usually works, when the company can prove it: access to confidential customer, pricing or technical information that the employee did not already have; specialized training; equity or option grants tied to the covenant. What usually does not: a promise of continued at-will employment alone, a signing bonus with no link to goodwill or confidential information, or a promise of confidential information that the company never kept.

Part two: are time, territory and scope reasonable?

The second part asks whether the restraint is bigger than the interest it protects. Texas courts look at the three limits together, and at the employee's real role.

• Time. There is no statutory maximum for ordinary employees. Courts have accepted restrictions measured in months to a few years when the other limits are tight and the employee had meaningful customer contact or access to confidential information. Longer terms need a reason.
• Geographic area. The territory should match where the employee actually worked or sold. A sales representative who covered three North Texas counties cannot be kept out of the whole country. Texas courts have treated a restriction limited to the specific customers the employee dealt with as a reasonable substitute for a map.
• Scope of activity. The covenant should bar the kind of work the employee did for the company, not any job at any competitor. Industry-wide exclusions, and restrictions covering customers the employee never contacted or learned about, are the most common reason a Texas court finds a covenant overbroad.

An agreement that fails this part is not void. Section 15.51(c) requires the court to reform it to reasonable limits and enforce it as reformed, but the employer then recovers no damages for breaches before reformation. That trade-off is covered in what happens when a Texas court finds a non-compete too broad.

Who has to prove it

In an employment agreement, the employer does. Section 15.51(b) puts the burden on the party seeking enforcement when the agreement's primary purpose is for the promisor to render personal services. The company must show, by a preponderance of the evidence, that the covenant meets both parts of the test. In a non-employment setting, such as the sale of a business, the burden flips to the party resisting enforcement. That is one reason non-competes given by a selling owner are treated more generously; non-competes in the sale of a business explains the difference.

What the former employee will argue

An employer deciding whether to enforce should expect the other side's lawyer to raise most of these, roughly in this order:

• No consideration: the company never actually gave confidential information or training, or gave only what the employee already knew from the industry.
• The information was not confidential: it was public, shared freely with customers or vendors, or not protected inside the company.
• The restraint is overbroad: the territory, the activity or the customer list reaches beyond anything the employee touched.
• The company breached first: unpaid commissions, a demotion or a change in terms that the employee says ended the agreement.
• Waiver or selective enforcement: the company let other departing employees compete without objection.
• Unclean hands or the knowing-overbreadth fee claim under section 15.51(c), which can make the employer pay the employee's attorney's fees if the company knew the limits were unreasonable and sued anyway.

None of these is fatal by itself, and several are fact questions that a hearing will resolve. The point is to know which of them has traction in your agreement before the first letter goes out.

Example

Suppose a Dallas staffing company hires an account manager, and on her first day she signs an agreement with a two-year non-compete covering “the State of Texas” and “any staffing or recruiting business.” The agreement promises access to the company's client contracts, margin data and candidate database, and the company does give her that access over the next month. Four years later she leaves for a competitor in Plano and begins calling the clients she managed.

Part one is likely satisfied: the promise of confidential information was made and performed, which is the Sheshunoff pattern. Part two is weaker. She served about forty clients in Dallas and Collin Counties, so a statewide, industry-wide restriction is broader than the goodwill she could carry away. A court would probably reform the covenant to the clients she actually handled and the kind of work she did, and enforce that. The company could obtain an injunction on the narrowed terms but no damages for the calls she made before the court reformed the agreement.

Special rules for some employees

The general test above does not tell the whole story for two groups. Physicians have had their own requirements in section 15.50(b) for years, and a 2025 statute, Senate Bill 1318, tightened them and added a new section 15.501 for dentists, nurses and physician assistants, with a one-year limit, a five-mile radius and a cap on any buyout, for covenants entered into or renewed on or after September 1, 2025. The details are in non-competes for physicians and other professionals in Texas.

Federal law, as of 2026, adds no restriction of its own. The Federal Trade Commission's 2024 rule banning most non-competes was set aside by a Texas federal court and has since been removed from the Code of Federal Regulations. Texas employers should still know the history, which is in where the FTC non-compete ban stands.

Checking your own agreement before you act

Enforceability is a prediction about how a court will apply section 15.50 to one document and one set of facts. Before sending a demand or filing suit, an employer can safely do the following:

1. Find the signed agreement, every amendment, and any later agreement (an option grant, a bonus plan, a promotion letter) that might contain or replace the covenant.
2. Write down what the employee was given after signing and when: systems, documents, customers, training.
3. List the customers and territory the employee actually handled in the last year or two of employment. That list is what a court will measure the covenant against.
4. Preserve the employee's email, devices and account logs before anything is wiped or reassigned.
5. Check how the company treated the last few departures under the same agreement.

With that in hand, a litigator can tell you which part of the test is strong, which is exposed, and whether the right next step is a letter, a lawsuit with a request for a temporary injunction, or a negotiated exit. The steps are laid out in how to enforce a non-compete against a former employee in Texas. Tina Wysk represents employers in non-compete disputes in Dallas state and federal courts.