Business Law

Non-competition Agreement

By Ted Smith, Attorney · Originally published August 5, 2020. Updated July 16, 2026.

Starting a new job is exciting, but the first document you sign there can shape your options for years afterward. Many Texas employment contracts include a non-competition agreement, a clause that limits your ability to compete with your employer after you leave. Texas law generally favors open competition, but it does allow non-competes when they meet specific requirements. Understanding those requirements matters whether you are the employer asking someone to sign, or the employee about to sign.

What makes a non-compete enforceable

A non-competition agreement, often called a non-compete, is a restrictive covenant in an employment contract that prohibits you from competing with your employer once your employment ends. Under Texas Business and Commerce Code Section 15.50, a covenant not to compete is enforceable if it is:

Part of, or ancillary to, an otherwise enforceable agreement at the time it is signed
Limited in time, geographic area, and the scope of activity restrained
Reasonable, and no broader than necessary to protect the employer’s legitimate business interest, such as goodwill, trade secrets, or client relationships

A non-compete that fails these limits, restricting an employee from working anywhere in the state for five years when the business only operates in Central Texas, for example, is the kind of overreach courts scrutinize closely.

Additional restrictions apply to certain healthcare professionals under §§ 15.50 and 15.501 for covenants entered into or renewed on or after September 1, 2025. Covered physicians, dentists, licensed nurses, and physician assistants generally must receive a buyout option capped at annual salary and wages, and the restriction may last no more than one year or extend more than five miles from the primary practice location. The terms must be clearly and conspicuously stated in writing. Physician covenants are also subject to profession-specific conditions, including a restriction on enforcement when the physician is discharged without good cause.

How Texas courts decide enforceability

There is no single formula a court applies. Enforceability is a fact-specific question under Texas law, with considerations such as:

How long the employee worked for the employer
The geographic area where the employer and employee actually did business
The scope of the employee’s role and what confidential or proprietary information they had access to

Access to confidential business information, customer lists, pricing, or trade secrets may support an employer’s argument that a restriction protects a legitimate business interest. The analysis remains fact-specific under the statewide statutory test.

What happens if a non-compete goes too far

Most contract provisions that do not meet statutory requirements are simply unenforceable. Non-competes work differently. Under Business and Commerce Code Section 15.51(c), if a covenant is found unreasonable or broader than necessary, the statute directs the court to reform the covenant, narrowing the time, geography, or scope to the extent necessary to make it reasonable. When reformation is required, the employer cannot recover damages for a breach that occurred before reformation, and the relief is limited to an injunction.

In practical terms, employees should not assume an overbroad non-compete is worthless just because it looks unreasonable on paper. A court can narrow it and enforce the reformed limits through an injunction. Employers should not assume an overbroad clause is safe just because it may be reformed later, because the statute bars pre-reformation damages in that situation.

What this means if you are the employee

If you are handed a non-compete before starting a new job, or you are considering leaving a job where you signed one, it is worth understanding exactly what it restricts before you act. Two questions matter most: what geographic area and time period does it cover, and does it actually reflect the confidential information or client relationships you had access to. A non-compete that restricts you from an entire industry statewide, when your actual role was limited to one city and one product line, may not hold up as written, but you generally should not test that assumption without legal advice first.

What this means if you are the employer

If you are asking employees to sign non-competes, the agreement needs to be tied to a real business interest and scoped no wider than necessary to protect it. A non-compete drafted too aggressively risks being challenged, and even a reformed version may not give you the protection you originally wanted. Pairing the non-compete with confidentiality and non-solicitation provisions, and keeping the restricted scope realistic, tends to hold up better than a broad, one-size-fits-all clause used across the whole company.

FAQ

Are non-competes enforceable in Texas? Generally, yes, if the agreement is tied to an otherwise enforceable contract and reasonably limited in time, geography, and scope, protecting a legitimate business interest rather than just blocking competition outright.

Can a court change my non-compete instead of throwing it out? Yes. Texas Business and Commerce Code Section 15.51(c) allows a court to reform, meaning narrow, an unreasonable covenant. When reformation is required, relief is limited to an injunction, and the employer cannot recover damages for breaches before reformation.

Does my non-compete apply if I am fired, not just if I quit? That depends on the specific language of your agreement and the circumstances of the termination. Read the contract’s actual terms, or have a lawyer review it, rather than assuming.

What if my employer never gave me anything of value in exchange for the non-compete? Enforceability under Section 15.50 depends in part on the non-compete being part of an otherwise enforceable agreement, which typically requires some form of consideration, like access to confidential information or specialized training. Whether a specific agreement meets that bar is a fact-specific question worth reviewing with a lawyer.

How long is too long for a non-compete? There is no fixed number in the statute. Courts look at whether the time period is reasonably necessary to protect the employer’s actual business interest given the employee’s role, which varies by industry and position.

Sources

Get a non-compete reviewed

Whether you are an employer drafting a non-compete or an employee trying to understand what you signed, it helps to have a lawyer look at the actual language before you rely on it. Ted Smith Law Group provides employment-contract services through its business-law practice. Call or text (254) 690-5688 for a consultation, or learn more about our business law practice.