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Non-Compete Agreements

2025-11-05 10:00

If your employer asked you to sign a non-compete agreement in Texas, you’re probably wondering: is this even enforceable? Unlike California, where non-compete agreements are almost always void, Texas will enforce non-compete agreements if they meet specific legal requirements.

This distinction matters enormously. A California employee can typically ignore a non-compete and move to a competitor without legal consequences. A Texas employee who violates an enforceable non-compete could face injunctions, damages, and attorney’s fees.

This guide explains Texas non-compete law under § 15.50 of the Texas Business & Commerce Code, including what makes these agreements enforceable, the blue-pencil doctrine that allows courts to modify overly broad terms, and practical strategies for challenging unreasonable restrictions.

What Is a Non-Compete Agreement?

A non-compete agreement (also called a covenant not to compete) restricts where you can work after leaving your current employer. These agreements typically prohibit you from:

  • Working for direct competitors
  • Starting a competing business
  • Working in the same industry within a specific geographic area
  • Soliciting the company’s customers or employees

Key distinction: Non-compete agreements are different from non-solicitation agreements, which only restrict soliciting customers or employees but don’t prevent you from working for competitors.

Texas Law Enforces Non-Competes (Unlike California)

Texas takes a fundamentally different approach than California:

Texas: Non-compete agreements are enforceable if they meet § 15.50 requirements and are “reasonable” in scope.

California: Non-compete agreements are void with very narrow exceptions (sale of business, partnership dissolution).

This means that if you’re moving from California to Texas or vice versa, you need to understand that the same agreement could be fully enforceable in one state and completely void in the other.

Texas Business & Commerce Code § 15.50: The Controlling Law

Section 15.50 of the Texas Business & Commerce Code establishes when non-compete agreements are enforceable. The statute requires three essential elements:

1. The Agreement Must Be Ancillary to an Otherwise Enforceable Agreement

The non-compete cannot stand alone. It must be part of another legitimate agreement, such as:

  • Employment agreement: The non-compete is included in your offer letter or employment contract
  • Sale of business: You’re selling your company and agreeing not to compete with the buyer
  • Partnership agreement: Partners agree not to compete if they leave the partnership
  • Confidentiality agreement: The non-compete is bundled with trade secret protections

What this means practically: Your employer cannot ask you to sign a standalone non-compete with no other benefit or agreement attached to it.

2. The Restriction Must Be Reasonable

The non-compete must be reasonable in three dimensions:

Time: How long the restriction lasts

  • Typically enforceable: 1-2 years
  • Questionable: 3-5 years
  • Rarely enforced: More than 5 years

Geography: The area where you cannot compete

  • Reasonable: The specific metropolitan area where you worked (e.g., Houston metro area)
  • Reasonable: Territory you personally served (e.g., Central Texas if you covered that region)
  • Questionable: Entire state of Texas
  • Unreasonable: Multi-state regions or nationwide restrictions (unless you truly worked nationally)

Scope: The type of work restricted

  • Reasonable: Specific job functions you performed (e.g., sales of medical devices if you sold medical devices)
  • Reasonable: Direct competitor products/services
  • Unreasonable: Entire industry when you only worked in one narrow segment
  • Unreasonable: Jobs completely different from your role

3. The Agreement Must Be Supported by Consideration

“Consideration” is legal terminology for “something of value exchanged.” The non-compete must be supported by valid consideration:

For new employees: The job itself is sufficient consideration. When you’re hired, receiving employment is adequate consideration for signing a non-compete.

For current employees: The job alone is NOT enough. Your employer must provide something NEW in exchange for the non-compete:

  • Promotion or new position
  • Raise or bonus
  • Access to confidential information or trade secrets
  • Stock options or equity
  • Enhanced benefits

Critical mistake: Many employers ask current employees to sign non-competes with no additional consideration. These agreements are not enforceable in Texas because there’s no valid consideration supporting them.

Example: You’ve worked for a company for 3 years. Your manager hands you a non-compete and says “sign this or you’re fired.” If the company doesn’t provide anything new (raise, promotion, bonus), the agreement lacks consideration and is likely unenforceable.

The Blue-Pencil Doctrine: Courts Modify, Don’t Void

One of the most important distinctions in Texas non-compete law is the blue-pencil doctrine. This doctrine allows courts to modify overly broad non-compete agreements rather than voiding them entirely.

How It Works

If a judge determines your non-compete is unreasonable, the court has two options:

  1. Strike unenforceable provisions: Remove specific unreasonable terms (like an excessive geographic area) while enforcing the rest
  2. Modify terms: Change time periods, geographic areas, or scope to make them reasonable

Example: Your non-compete prohibits you from working anywhere in the United States for 5 years in any technology role. The court might modify it to:

  • Geographic area: Austin metro area (where you actually worked)
  • Time period: 18 months (more reasonable)
  • Scope: Software sales specifically (your actual role)

Why This Matters

In California, overly broad non-competes are simply void. In Texas, courts will fix them and enforce the modified version.

Practical consequence: You cannot simply ignore a Texas non-compete because it seems unreasonable. A court might modify it to make it reasonable and then enforce it against you.

When Are Non-Competes Enforceable in Texas?

Based on § 15.50 and Texas case law, non-competes are most likely to be enforced when:

Strong Enforceability Factors

  • You had access to trade secrets: Customer lists, pricing information, proprietary processes, confidential business strategies
  • Reasonable restrictions: 1-2 years, limited geographic area, narrow scope matching your actual role
  • Valid consideration: New employees got the job; current employees received promotion, raise, or new benefits
  • You worked in specific territory: Geographic restriction matches where you actually serviced customers
  • Direct competition: You’re moving to a direct competitor doing essentially the same work

Weak Enforceability Factors

Courts are less likely to enforce non-competes when:

  • No trade secrets or confidential information: You had no access to legitimately protectable information
  • Unreasonable restrictions: Multi-year durations, statewide or national geographic areas, overly broad scope
  • No consideration: Current employee signed with nothing new in exchange
  • Economic hardship: The restriction would prevent you from earning a living in your field
  • Changed circumstances: The employer materially breached the employment relationship
  • Generic skills: The restriction would prevent you from using general skills learned on the job

How to Challenge a Non-Compete Agreement

If you’re facing a non-compete restriction, you have several options:

1. Negotiate Before Signing

Best strategy: Negotiate the terms BEFORE you sign:

  • Request shorter time periods (1 year instead of 2)
  • Narrow the geographic area to where you actually work
  • Limit the scope to your specific role and direct competitors only
  • Ask for severance payment during the restriction period
  • Request carve-outs for specific companies or roles

Many employers will negotiate because they want to hire you and reasonable restrictions are just as protective as overly broad ones.

2. Review for Consideration Issues

If you’re a current employee who was asked to sign a non-compete with nothing new in return, the agreement likely lacks valid consideration:

Document what happened:

  • When did you sign?
  • What did the employer provide in exchange?
  • Were you threatened with termination?
  • Did your job duties or compensation change?

Lack of consideration is one of the strongest defenses to a Texas non-compete.

3. Challenge Reasonableness

Even if the non-compete has valid consideration, you can challenge it as unreasonable:

Time period: Argue the duration is longer than necessary to protect legitimate business interests

Geographic scope: Demonstrate the area is broader than where you worked or the employer operates

Scope of activities: Show the restriction covers work unrelated to your role or the employer’s business

4. Demonstrate Lack of Protectable Interest

Texas courts require employers to show a legitimate business interest justifying the restriction:

Protectable interests include:

  • Trade secrets
  • Confidential business information
  • Customer relationships you developed
  • Specialized training the employer provided

Not protectable:

  • General skills and knowledge
  • Relationships with customers you didn’t service
  • Public information
  • Skills you brought to the job

5. Consider Your New Employment Carefully

Before accepting a new position, evaluate the risk:

Lower risk:

  • The new role is substantially different from your old one
  • The new employer operates in different markets or territories
  • The non-compete terms are clearly unreasonable
  • You had no access to trade secrets or confidential information

Higher risk:

  • Direct competitor in the same market
  • Same job function and customer base
  • Reasonable non-compete terms (1-2 years, local area, narrow scope)
  • You had significant access to trade secrets

6. Consult an Employment Attorney

Non-compete disputes can result in:

  • Preliminary injunctions (court orders stopping you from working)
  • Damages for breach of contract
  • Attorney’s fees
  • Loss of income during litigation

Given these stakes, consult an employment attorney before:

  • Signing a non-compete agreement
  • Accepting a position that might violate a non-compete
  • Responding to a demand letter from a former employer

What Happens If You Violate a Non-Compete?

If you violate an enforceable non-compete agreement in Texas, your former employer can seek multiple remedies:

Injunctive Relief

The employer can ask a court to immediately stop you from working for the competitor. This is called a “preliminary injunction” and can be issued very quickly (sometimes within days).

Impact: You could be forced to quit your new job immediately, even before a trial on the merits.

Monetary Damages

The employer can sue for damages caused by your competition:

  • Lost profits
  • Lost customers
  • Competitive harm
  • Costs of replacing you

Attorney’s Fees

Many non-compete agreements include attorney’s fees provisions, meaning if you lose, you could owe the employer’s legal fees (which can be substantial).

Criminal Charges (Rare)

If you misappropriate trade secrets, you could face criminal charges under the Texas Uniform Trade Secrets Act (TUTSA) or federal Defend Trade Secrets Act (DTSA).

Non-Competes vs. Non-Solicitation Agreements

Texas employers often use both types of agreements:

Non-Compete Agreement: Restricts WHERE you can work (cannot work for competitors)

Non-Solicitation Agreement: Restricts WHO you can contact (cannot solicit customers or employees)

Non-solicitation agreements are typically easier to enforce because they’re narrower in scope. You can work for a competitor but simply cannot actively solicit your former employer’s customers or employees.

Many agreements include both restrictions. Understanding the difference matters because violating a non-solicitation agreement can be easier to prove (you actively contacted customers) than violating a non-compete (you merely work for a competitor).

Key Differences: Texas vs. California Non-Competes

If you’re moving between states or your employer operates in multiple states, understanding these differences is critical:

Element Texas California
Enforceability Enforceable if reasonable Void (with narrow exceptions)
Legal Standard § 15.50 requirements Business & Professions Code § 16600
Court Modification Yes (blue-pencil doctrine) No (void is void)
Consideration Required Yes (especially for current employees) N/A (void regardless)
Trade Secrets Protectable through non-competes Protected through trade secret law, not non-competes

Example scenario: A California company acquires a Texas company. California employees have unenforceable non-competes. Texas employees have enforceable non-competes. The same corporate policy produces completely different legal results.

Related Topics

Frequently Asked Questions

Can my Texas employer enforce a non-compete if I move to California?

It depends on which state’s law governs the agreement. If the contract specifies Texas law applies, Texas courts would likely enforce it. However, California courts will not enforce non-competes even if the contract says Texas law applies. This creates complex jurisdictional issues that typically require legal advice.

How long are non-competes enforceable in Texas?

Courts typically enforce non-competes lasting 1-2 years. Restrictions lasting 3-5 years are questionable and may be reduced. Non-competes lasting more than 5 years are rarely enforced unless there are extraordinary circumstances (like sale of a business).

Can my employer enforce a non-compete if they fired me?

Yes. In Texas, non-competes are generally enforceable regardless of who ended the employment relationship. However, if the employer materially breached the employment agreement or acted in bad faith, this could be a defense. The fact that you were fired does not automatically void the non-compete.

What if I never received anything for signing the non-compete?

If you’re a current employee who signed a non-compete with no new consideration (no raise, promotion, bonus, or new benefits), the agreement likely lacks valid consideration and is unenforceable. Document exactly what happened when you signed and consult an employment attorney.

Can a Texas court reduce an unreasonable non-compete instead of voiding it?

Yes. This is called the blue-pencil doctrine. Texas courts can modify overly broad non-competes by reducing time periods, narrowing geographic areas, or limiting the scope of restricted activities. This is a critical difference from California, where unreasonable non-competes are simply void.

Do I need a lawyer to review my non-compete agreement?

While not legally required, consulting an employment attorney is strongly recommended before signing a non-compete or before accepting a new position that might violate one. The stakes (injunctions, damages, attorney’s fees) make legal advice a worthwhile investment.

Legal Disclaimer: This article provides general information about Texas non-compete agreements and should not be construed as legal advice. Non-compete law involves complex fact-specific analysis that depends on the specific terms of your agreement, your role, and the circumstances of your employment. If you’re facing a non-compete restriction or dispute, consult a qualified Texas employment attorney for advice specific to your situation.

References

  • Texas Business & Commerce Code § 15.50
  • Texas Uniform Trade Secrets Act (TUTSA)
  • Federal Defend Trade Secrets Act (DTSA)
  • California Business & Professions Code § 16600