Non-Compete Agreements in Texas: Are They Enforceable?

Non-compete agreements are a common tool used by employers to protect their business interests, but their enforceability varies from state to state. In Texas, non-compete agreements are enforceable, but they must meet specific legal requirements to be considered valid. Both employers and employees should understand how these agreements work to ensure compliance with Texas law.

What Is a Non-Compete Agreement?

A non-compete agreement is a contract that restricts an employee from working for a competitor or starting a competing business for a certain period after leaving a company. These agreements aim to protect trade secrets, confidential information, and business relationships.

Are Non-Compete Agreements Enforceable in Texas?

Yes, but under Texas Business and Commerce Code § 15.50, a non-compete agreement must meet the following requirements to be enforceable:

1. It Must Be Part of an Enforceable Agreement
   The non-compete clause must be ancillary to an otherwise enforceable agreement, such as an employment contract or a confidentiality agreement.
2. It Must Protect a Legitimate Business Interest
   The employer must have a genuine need for the restriction, such as protecting trade secrets, proprietary information, or specialized training provided to the employee.
3. It Must Be Reasonable in Scope
   The restrictions must be reasonable in time, geographic area, and scope of activity. Courts may modify or reject overly broad agreements. Example: A non-compete clause preventing an employee from working anywhere in Texas for five years would likely be deemed unreasonable.

What Happens If a Non-Compete Agreement Is Too Broad?

If a non-compete agreement is too restrictive, Texas courts may modify it rather than void it entirely. This means a judge can adjust the terms to make them reasonable while still protecting the employer’s interests.

What Should Employers and Employees Do?

• Employers should draft non-compete agreements carefully, ensuring they are narrowly tailored to protect legitimate business interests.
• Employees should review these agreements before signing and seek legal advice if they feel the restrictions are unfair or excessive.

Final Thoughts

Non-compete agreements in Texas can be enforceable, but they must be reasonable and necessary to protect an employer’s business. Whether you’re an employer looking to draft a non-compete or an employee questioning its validity, consulting with a Texas employment attorney can help ensure your rights are protected.

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