Texas non-compete law: what actually holds up.
Non-competes are enforceable in Texas when they pass the statutory test: ancillary to an otherwise enforceable agreement, and reasonable in time, geography, and scope. Most of the interesting law lives inside those two clauses, including why a paycheck alone cannot buy a covenant, why courts rewrite bad ones instead of tossing them, and the one-year cap that now governs healthcare.
The statutory test, in plain terms
The Covenants Not to Compete Act, Section 15.50 of the Business and Commerce Code, asks two questions. First: is the covenant ancillary to an otherwise enforceable agreement? This is where the consideration doctrine does its work. Under the Texas Supreme Court’s cases, the employer’s side of the bargain has to give rise to the interest the covenant protects: confidential information, customer goodwill, specialized training, equity. A cash payment for a signature, standing alone, does not qualify, because money creates no interest worth restraining competition to protect.
Second: are the limits reasonable? Time, geographic territory, and the scope of restrained activity each have to be no broader than necessary to protect the employer’s interest. In practice: one to two years survives routinely; territory should track where the employee actually worked or the customers they actually touched; and scope should track the job, not the industry. A covenant that bars a salesperson from an entire field, anywhere, for five years is not a strong covenant. It is a drafting mistake waiting for a judge.
The reformation rule, and why it changes everyone’s strategy
Here is the piece both sides misunderstand. In Texas, an overbroad non-compete is usually not void, it gets reformed: Section 15.51 directs the court to rewrite the covenant to the maximum enforceable limits and enforce it as rewritten. That cuts against both parties’ instincts. Employees who assume a bad covenant equals no covenant are wrong; something usually survives. Employers who draft aggressively on the theory that a court will trim it are also wrong in a way that costs money: when reformation is required, the remedy for conduct before the rewrite is limited to going-forward relief, and an employer who knowingly sought to enforce an overbroad covenant can end up paying the employee’s attorney’s fees.
The practical upshot: precise drafting is not lawyerly perfectionism, it is the difference between a covenant that supports a damages claim and one that supports only an injunction a judge had to construct.
A Fort Worth court has now treated reformation as an obligation rather than an option. In Galderma Laboratories v. Brenner, 2026 Tex. Bus. 12, the Texas Business Court read Section 15.51(c) to require narrowing: where a covenant is overbroad, the court must reform it rather than invalidate it. It struck the ownership-and-management language from the activity scope and the confidential-information trigger from the geographic reach, then granted a temporary injunction confined to a single product market, while denying injunctive relief on the customer non-solicit, the worker non-solicit, confidentiality and the trade secret claim. An employer should read that as confirmation that overbreadth costs scope rather than the whole covenant. An employee should read it as confirmation that signing something plainly unenforceable is not the defense it sounds like.
Healthcare runs under new rules
Senate Bill 1318, effective September 1, 2025, rewrote the field for medicine. For agreements entered or renewed from that date, covering physicians, dentists, nurses, and physician assistants: duration is capped at one year, geography at a five-mile radius from the practitioner’s primary practice location, and the buyout, the practitioner’s statutory right to purchase their way out, is capped at total annual salary and wages at termination. For physicians, a termination without good cause voids the covenant entirely. If your practice employs providers, every renewal after September 2025 quietly opts the agreement into the new regime; renewal time is redrafting time.
The FTC ban, and what happened to it
The federal rule that would have banned most non-competes nationwide was enjoined before it ever took effect, and Texas law has governed without interruption. The fuller story of that episode, and what Texas employers should have taken from it, is in Non-competes in Texas: what employers need to know right now. The short version for planning purposes: draft to the Texas statute, not to Washington headlines.
Two situations with their own rules
Selling a business. The covenant you sign at closing is the strongest non-compete Texas law knows, because the buyer paid for the goodwill it protects, and courts treat sale-of-business covenants more favorably than employment ones, including on duration. What that covenant should and should not concede is part of the deal itself: see the owner’s roadmap to selling a business in Texas.
Enforcement, from either chair. Nearly every non-compete fight opens the same way: a cease and desist letter to the departed employee, usually copied to the new employer. Whether that letter is the end of the matter or the start of an injunction case depends on the enforceability analysis above, which is why the letter, sent or received, is the right moment to have the covenant actually read.
One call, either chair
I draft non-competes built to survive the statute, review the ones employees are asked to sign, and handle the covenant questions inside business sales, where they are deal terms, not boilerplate. Contested enforcement and employment litigation move to the right colleague at Scale LLP without you starting over. One relationship, one number: (682) 529-7177. Not sure which chair you’re in? Start with How can I help?
Common questions
Yes. The FTC's national ban never took effect, and Texas law governs. Under the Covenants Not to Compete Act, a non-compete is enforceable if it is ancillary to an otherwise enforceable agreement and reasonable in time, geography, and scope of restrained activity. Texas courts enforce well-drafted covenants routinely. What they do not enforce is overreach, and the healthcare professions now run under stricter statutory limits.
It depends on what you actually signed, and the honest answer requires reading it. The questions that decide it: Did the employer give you the kind of consideration that supports a covenant, confidential information, goodwill, specialized training, equity, rather than just a paycheck? Are the time, territory, and restricted activities reasonable against the job you actually did? Does the new role even fall inside the restricted scope? A meaningful share of signed non-competes are broader than Texas law will enforce as written, which is not the same as being free of them. Get the document read before you resign, not after.
The enforcement sequence usually starts with a cease and desist letter to you, often copied to your new employer, followed, if the employer is serious, by a suit seeking a temporary restraining order and injunction, and sometimes damages. Whether any of that succeeds turns on enforceability. And the reformation rule shapes the money: when a court has to rewrite an overbroad covenant, the employer's remedy for conduct before reformation is limited, which is why many of these disputes resolve on the letters rather than in court.
The well-drafted ones do. Texas courts are not hostile to non-competes; they are hostile to laziness, industry-wide bans, nationwide territories for regional jobs, five-year terms for junior employees. Because courts reform rather than void overbroad covenants, even a flawed agreement rarely evaporates entirely. The realistic frame for both sides: the fight is usually about how much of the covenant survives, not whether any of it does.
The statute sets no fixed number for most workers; it requires the duration to be reasonable, and Texas courts routinely accept one to two years while looking hard at longer terms. Two groups have fixed rules: healthcare practitioners covered by the 2025 law are capped at one year, and covenants signed as part of a business sale can reasonably run longer, because the buyer paid for the goodwill the covenant protects.
Senate Bill 1318, effective September 1, 2025, applies to agreements entered or renewed from that date and covers physicians, dentists, nurses, and physician assistants. The limits: duration capped at one year after the relationship ends; geography capped at a five-mile radius from the practitioner's primary practice location; a buyout right capped at the practitioner's total annual salary and wages; and, for physicians, the covenant becomes void if the physician is terminated without good cause. Existing older agreements run under the prior rules until renewed.
The covenant is only as strong as its drafting. Find out which one you have.
The words you'll hear
If this goes further, these are the terms that will come up, from us or from the other side. Each one links to a fuller explanation.
- Restrictive Covenant
- A privately-imposed limitation on the use of real property, typically arising from a deed restriction or recorded declaration governing a subdivision, planned community, or condominium.
- Reformation (of a Covenant Not to Compete)
- Reformation is a court's rewriting of an overbroad non-compete so that it becomes enforceable.
- Trade Secret
- Information, including formulas, methods, processes, customer lists, financial data, that derives independent economic value from not being generally known and is the subject of reasonable efforts....
- Injunctive Relief
- A court order directing a party to do or refrain from doing a specific act.
- Consideration
- The bargained-for exchange that supports a contract, something of value (a promise, act, forbearance, or property) given by each party in exchange for the other's promise.
- Tortious Interference
- A tort claim arising from a third party's wrongful interference with the plaintiff's contractual or prospective business relationships.