Yes, Texas enforces non-competes when they pass the two tests in Texas Business and Commerce Code §15.50. The covenant has to be part of another enforceable agreement, such as your promise to give the employee confidential information. Its limits on time, geographic area, and scope of activity also have to be reasonable. If a judge finds those limits too broad, the judge narrows them and enforces the narrower version.
The harder questions start after a sales lead or partner leaves for a competitor. A clause written too broadly can cost you damages for every breach before a judge rewrites it, plus the employee’s legal fees in some cases. Healthcare employers have faced tighter rules since September 1, 2025, and when a non-compete fails, Texas trade secret law may still protect your client data.
If you’re hiring a key employee or watching one walk out, Kelly Legal Group’s business attorneys can review your agreements before anyone tests them. If someone breaks one, the same attorney who drafted it can ask a court for an injunction. Start with the two tests every Texas non-compete has to pass.
What Does Texas Law Require for a Non-Compete to Hold Up?
A non-compete agreement in Texas holds up when it meets Texas Business and Commerce Code §15.50(a). It must be ancillary to (part of) an otherwise enforceable agreement when it’s signed. Its limits on time, area, and scope must be reasonable and no broader than needed to protect your goodwill or other business interest.
Texas non-compete law gives both tests equal weight. A clause with a modest one-year limit covering Travis County can still fail if nothing enforceable sits underneath it.
| Requirement | What it means for you | Where owners trip up |
|---|---|---|
| Part of an otherwise enforceable agreement | You promised the employee something real, such as confidential information or specialized training | Relying on the paycheck or “continued employment” alone |
| Reasonable time | Long enough to protect the relationships or information at stake | Picking five years because it sounds safe (Texas sets no fixed number outside healthcare) |
| Reasonable geographic area | Tied to where the employee worked or which clients they served | A statewide or nationwide ban for a role that covered one metro |
| Reasonable scope of activity | Limited to the kind of work the employee did for you | Barring any job “in the industry,” including roles that don’t compete |
Section 15.52 makes these statutory criteria the exclusive test, and they preempt common law. So a judge in Austin, Houston, or Lubbock starts from the same two questions.
Who Has to Prove the Non-Compete Is Reasonable?
In an employment agreement, you do. Under §15.51(b), when the agreement’s main purpose is to have someone perform personal services, the employer carries the burden of proving the covenant meets §15.50.
The burden flips in other deals. When you buy a business and the seller signs a non-compete, the seller has to prove the covenant is unreasonable.
What Counts as the “Otherwise Enforceable Agreement” in Texas?
The “otherwise enforceable agreement” is the promise you make in exchange for the non-compete. It has to give you a real reason to restrict competition. In Texas, the promises that qualify most often are confidential information, specialized training, and a stake in the company’s goodwill.
Say you hire a sales manager in Round Rock and hand her your customer pricing sheets in week one. That handoff is what supports her non-compete. In Alex Sheshunoff Management Services v. Johnson (Tex. 2006), the Texas Supreme Court held that a covenant becomes enforceable when the employer performs the promise it made in exchange.
Strictly speaking, the promise alone isn’t enough. You have to deliver the information before the employee leaves, and a record of when you delivered it helps if the case reaches a hearing.
Equity can work too. In Marsh USA Inc. v. Cook (Tex. 2011), the court held that stock options tied to company goodwill can support a non-compete. The options give the employee a stake in the business you’re protecting.
A paycheck alone doesn’t qualify. In Light v. Centel Cellular Co. (Tex. 1994), the court treated a bare promise of continued at-will employment as illusory, because you could fire the employee the next day.
Non-competes signed in the sale of a business follow the same statute, with goodwill as the interest. The buyer pays for the seller’s client relationships, so a seller’s promise not to open a competing shop protects what the buyer paid for. The same logic applies when co-owners part ways in a Texas business divorce and one owner buys out the other.
What Happens if a Court Finds Your Non-Compete Too Broad?
A Texas judge who finds your non-compete too broad must reform it and enforce the narrower version. Reform means rewriting the time, area, or scope to a reasonable limit. Under §15.51(c), you can’t collect money damages for any breach before reformation, and your relief is limited to an injunction.
Consider what that does to a fast-moving case. Your former account manager starts calling clients in March, and the judge narrows the clause in August.
You can’t recover a dollar of the business those clients moved between March and August, even with a clear breach. You keep the injunction going forward. The five months behind you stay lost.
Jeff Kelly was a CFO before he practiced law (at a Kansas City home-services company), so he runs this math before a client signs anything. What does that employee’s client book earn you in a year? Lose recovery for five months of breach, and you’ve written off close to half that number.
Then there’s the fee risk. In a personal-services agreement, the employee may recover attorney’s fees from you. That requires proof you knew the limits were unreasonable at signing and tried to enforce them beyond what your business needed.
Does that happen often? Courts don’t publish a rate. A statewide ban on a one-city sales job is the kind of clause that invites the argument, though.
| Outcome | Reasonable clause | Clause a judge has to narrow |
|---|---|---|
| Damages for breaches before the ruling | Available | Not available |
| Injunction | Available | Available, on the narrowed terms only |
| Paying the employee’s attorney’s fees | Not at risk | Possible in personal-services agreements if you knew the limits were unreasonable |
How Did Texas Non-Compete Law Change in 2025?
Texas non-compete law changed in 2025 for healthcare employers. Senate Bill 1318 took effect September 1, 2025, and set strict limits for physicians, dentists, licensed nurses, and physician assistants. For other employers, the §15.50 test stays the same, and the FTC’s national ban was set aside in court.
What SB 1318 Changed for Physicians and Other Healthcare Workers
SB 1318 applies to non-competes signed or renewed on or after September 1, 2025. Older agreements stay under the law in place when they were signed, until someone renews them.
Covered agreements must meet each limit in the table below. Physician covenants also keep the older rules on patient lists, medical records, and continuing care for patients with an acute illness.
| Rule | Physicians (§15.50(b) and (d)) | Dentists, nurses, and physician assistants (§15.501) |
|---|---|---|
| Buyout | Required, capped at total annual salary and wages at termination | Same |
| Maximum length | 1 year after the job ends | Same |
| Maximum area | 5-mile radius from the primary practice location | Same |
| Writing | Terms stated clearly and conspicuously in writing | Same |
| Fired without good cause | Covenant is void | Not addressed in §15.501 |
One carve-out. Physicians who manage or direct medical services in an administrative role fall outside the stricter physician rules under §15.50(b-1).
For an Austin practice group, the change is easy to see on a map. A 5-mile radius around a Westlake clinic covers far less ground than a 20-mile radius reaching into Williamson County.
Is the FTC Non-Compete Ban Still Coming?
No. In 2024, a federal court in the Northern District of Texas set aside the FTC’s rule in Ryan LLC v. FTC. On September 5, 2025, the FTC voted to dismiss its appeals and accept that ruling.
The agency has since pursued individual employers case by case. The Texas Legislature next meets in January 2027, and as of mid-2026, no bill to ban non-competes statewide had advanced.
Can the Texas Uniform Trade Secrets Act Protect You if Your Non-Compete Fails?
Yes, in part. The Texas Uniform Trade Secrets Act (Tex. Civ. Prac. & Rem. Code ch. 134A) protects valuable information you took reasonable steps to keep secret. It stops a former employee from using your secrets, even without a non-compete, though it can’t stop them from working for a competitor.
Under §134A.002(6), a trade secret can include customer and supplier lists, pricing, bid formulas, and business plans. Two conditions apply. The information must get its value from not being generally known, and you must have taken reasonable measures to protect it.
Reasonable measures look ordinary day to day. These are the ones a Texas judge will likely ask about.
- Confidentiality agreements signed by every employee who sees client or pricing data
- Access limited by role in your CRM, accounting system, and shared drives
- Files and reports marked confidential
- Download and email-forwarding logs you keep and review
- An exit checklist that collects devices and confirms the return of company files
A judge can stop the misuse itself by enjoining actual or threatened misappropriation. The order can’t bar the person from using general knowledge, skill, and experience acquired during employment (§134A.003).
Damages under §134A.004 cover your actual loss plus the employee’s unjust enrichment, or a reasonable royalty. For willful and malicious misappropriation shown by clear and convincing evidence, a jury can add exemplary damages up to twice that award.
Fees can run in either direction. Under §134A.005, a court may award attorney’s fees for willful and malicious misappropriation. It may also award them against a party who brings a trade secret claim in bad faith.
(Federal law offers a parallel claim under the Defend Trade Secrets Act, which matters if your case belongs in federal court.)
| Question | Non-compete claim | TUTSA claim |
|---|---|---|
| What it stops | Competing within the covenant’s time, area, and scope | Using or disclosing your trade secrets |
| Signed agreement required | Yes | No |
| How long protection lasts | The covenant’s term | As long as the information stays secret |
| Money damages | Yes, unless the judge had to narrow the clause | Yes, plus up to 2x for willful and malicious misappropriation |
What Should You Do in the First Two Weeks After a Key Employee Leaves for a Competitor?
Act inside the first 14 days. Lock down access, preserve the evidence, send a demand letter, and decide whether to ask a court for a temporary restraining order (TRO). Delay gives the employee more time with your clients and can weaken your argument that the harm is urgent.
- Day 1. Cut off email, CRM, and cloud access, and collect the laptop and phone. Don’t wipe or reissue either device.
- Days 1 to 3. Have the devices imaged by a forensic vendor and pull 60 to 90 days of logs (email forwarding, USB transfers, cloud downloads, and CRM exports).
- Days 2 to 4. Gather every signed document, including the offer letter, non-compete, confidentiality agreement, and any equity grants. Confirm what the employee received in exchange and when.
- Days 3 to 7. Keep a written log of client contact. Note any client who calls about the departure, moves work, or names the new firm.
- Days 5 to 10. Send a demand letter to the former employee, and consider sending a copy to the new employer. Cite the specific clauses and stay within what the agreement says.
- Days 7 to 14. Decide on a TRO. Under Texas Rule of Civil Procedure 680, a TRO granted without notice lasts up to 14 days and can be extended once. Rule 684 requires a bond.
The download logs can carry more weight at a TRO hearing than the agreement itself, because they show which files were taken. Avoid these moves during the same two weeks.
- Calling clients to criticize the former employee
- Logging into the employee’s personal email or cloud accounts
- Threatening claims the agreement doesn’t support (overreach feeds the fee argument under §15.51(c))
- Waiting on more evidence while clients move their work
When the person leaving is a co-owner, the case usually involves fiduciary duties too, so read our guide to a partnership dispute in Texas. If the departure turns into a broader contract dispute, the same evidence supports both claims.
How Do You Draft a Non-Compete That Holds Up in Austin Courts?
Draft the narrowest restriction that still protects the clients and information the employee touches. Texas judges enforce reasonable limits and narrow the rest, and every narrowing costs you damages for past breaches.
Do these.
- Promise confidential information or specialized training, deliver it early, and record the date.
- Tie the restricted area to the clients the employee served. Some Texas courts accept a client-based limit in place of a mileage radius (Gallagher Healthcare Ins. Servs. v. Vogelsang, Tex. App. 2009), which fits remote and hybrid staff.
- Match the length to how long the client relationships or pricing data stay valuable.
- Pair the non-compete with confidentiality and client non-solicitation clauses, and draft the non-solicitation clause to the same §15.50 standard.
- Use the 1-year, 5-mile, salary-capped buyout format for any physician, dentist, nurse, or physician assistant.
Avoid these.
- “Anywhere in Texas” or nationwide limits for a local role
- Bans on any job in the industry, including roles that don’t compete with you
- Continued employment as the only thing the employee gets in exchange
- A form copied from another state, since states treat non-competes differently
Austin employers with staff in Round Rock, Georgetown, or out of state get more from client-based limits than from a downtown radius. If your current agreements came from a template, Kelly Legal Group’s business contract attorneys can check them against §15.50 before you need to enforce one.
Bottom Line for Texas Business Owners
Texas enforces non-competes that are part of a real exchange and limited to what your business needs. Clauses written too broadly still get enforced, but only in narrowed form and without damages for earlier breaches.
Draft narrowly and deliver the confidential information you promised. Back every agreement with trade secret protections so you still have a claim if the non-compete fails.
Common Questions About Texas Non-Compete Agreements
Are Non-Competes Enforceable in Texas in 2026?
Yes, non-competes are enforceable in Texas in 2026 when they meet §15.50. No statewide ban exists, and the FTC’s national rule was set aside in 2024. Healthcare workers covered by SB 1318 get added limits on length, area, and buyout price.
Can I Work for a Competitor if I Signed a Non-Compete in Texas?
You can work for a competitor after signing a Texas non-compete if the job falls outside the clause’s time, area, and scope. You can also take the job if the clause fails the §15.50 test. A role inside valid limits can lead to an injunction, so have the agreement reviewed before you accept.
How Long Can a Non-Compete Last in Texas?
Texas law sets no fixed maximum for how long most non-competes can last. The length only has to be reasonable for the interest you’re protecting. For physicians, dentists, nurses, and physician assistants, covenants signed or renewed since September 1, 2025, must end within one year after the job ends.
Does Continued Employment Count as Consideration for a Texas Non-Compete?
Continued at-will employment alone doesn’t count as consideration for a Texas non-compete. Courts look for a promise such as confidential information, specialized training, or stock options tied to goodwill, delivered before the employee leaves.
Is a Non-Compete Enforceable if the Employee Is Fired?
A Texas non-compete can still be enforceable after an employee is fired, since §15.50 has no general firing exception. A judge may weigh the circumstances when deciding on an injunction. Physicians are the exception, because §15.50(d) voids a physician’s covenant after an involuntary discharge without good cause.
How Well Do Non-Competes Hold Up in Texas Courts?
Texas courts enforce non-competes that are drafted narrowly and supported by a real promise, so a well-drafted clause holds up. Overbroad clauses still get enforced after a judge narrows them. You lose damages for breaches that happened before the rewrite.
Are Non-Solicitation Agreements Treated the Same as Non-Competes in Texas?
Non-solicitation agreements are treated much the same as non-competes in Texas. In Marsh USA Inc. v. Cook, the Texas Supreme Court described covenants restricting solicitation of a former employer’s customers and employees as restraints of trade governed by the same statute. They need the same supporting promise and reasonable limits.
Have Your Non-Compete Reviewed Before Your Next Key Hire Signs
The cheapest time to fix a non-compete is before the employee signs it. Kelly Legal Group has worked with Austin business owners since 2009. The same attorney can draft your agreement and enforce it in Travis, Williamson, or Hays County courts.
Worried about the cost? Our breakdown of what a business attorney costs in Austin covers typical fee structures.
Call Kelly Legal Group at (512) 505-0053 or schedule a consultation to have your current agreements reviewed before your next key hire signs.
