Texas Noncompete Law: Requirements, Reasonableness, and Remedies

Texas noncompete law enforces these agreements, but only when they meet the specific requirements of Section 15.50 of the Texas Business and Commerce Code: the noncompete must be tied to an otherwise enforceable agreement, and the limits on time, geography, and scope of activity must be reasonable and no broader than needed to protect a legitimate business interest.¹ If a noncompete overshoots on any of those dimensions, Texas courts don’t strike it down. They rewrite it to what the judge considers reasonable and then enforce the narrower version.

The Three Statutory Requirements

Section 15.50(a) sets the bar. A noncompete must be ancillary to or part of an otherwise enforceable agreement at the time it’s signed, its restrictions must be reasonable, and those restrictions must impose no greater restraint than necessary to protect the employer’s goodwill or other legitimate business interest.¹

The first requirement means a noncompete cannot stand alone. It has to be attached to a real contract — a confidentiality agreement, a stock option plan, or an arrangement giving the employee access to proprietary information. The second and third work together: courts look for a proportional link between what the restriction takes from you and what competitive threat your departure actually creates.

The At-Will Consideration Problem

Most Texas noncompete fights turn on the first requirement. If you’re an at-will employee who can be fired tomorrow, what exactly is the employer giving you in exchange for your promise not to compete?

The Texas Supreme Court answered this in Alex Sheshunoff Management Services v. Johnson. A noncompete tied to at-will employment becomes enforceable when the employer actually follows through on the promises it made to secure the agreement.² If the employer promises access to confidential information, specialized training, or proprietary client data in exchange for your signature, the noncompete binds once the employer delivers on that promise.

Two conditions have to line up. The consideration the employer provides must actually give rise to the interest the noncompete is designed to protect, and the noncompete must be designed to enforce the employee’s return promise — such as a commitment not to disclose confidential information.² A noncompete bolted onto a bare employment offer, with no promise of trade secrets, training, or confidential data, is much harder to enforce. The more specialized the knowledge the employer actually shares, the sturdier the noncompete’s foundation.³

What Counts as Reasonable Time, Geography, and Scope

Even a properly anchored noncompete fails if its restrictions are unreasonable. Courts look at each dimension separately.

On time, the restricted period must last no longer than necessary to protect the employer’s interest. For most employment noncompetes, courts accept restrictions between six months and two years. A five-year ban draws heavy scrutiny unless the employer can explain why anything shorter falls short.

On geography, the restricted area should match the territory where you actually worked or where the employer has a customer base you had contact with. A statewide restriction on a salesperson who covered three counties is the kind of overreach courts routinely reject.

On scope of activity, the noncompete should only prohibit work similar to what you did for the employer. A restriction that blocks you from any role at a competitor, including work unrelated to your former position, will likely be narrowed or struck down.

These dimensions trade against each other. A broader geographic restriction can survive if the time period is short. A longer time restriction can hold up if the geography is narrow. An agreement that’s aggressive on all three fronts almost guarantees a judicial rewrite.

What Happens When a Court Finds the Restrictions Unreasonable

Here Texas diverges from many other states. Under Section 15.51(c), when a court finds a noncompete is ancillary to a valid agreement but contains unreasonable limits, the court must reform the agreement rather than void it. The judge rewrites the time, geography, or scope to what the court considers reasonable, then enforces the revised version.⁴

Mandatory reformation has a big practical consequence. It strips the employer of damages for any breach that happened before the court drew the new lines. Until reformation, the employer’s only remedy is injunctive relief — a court order stopping the competitive activity going forward.⁴ An employer who drafts overbroad restrictions and then sues for breach may win the injunction but lose the ability to recover the money it says it lost during the breach period.

Section 15.51(c) also contains a fee-shifting provision that favors employees in narrow circumstances. If the noncompete’s primary purpose was to secure personal services, the employee proves the employer knew at the time of signing that the restrictions were unreasonable, and the employer still tried to enforce the overbroad terms, the court may award the employee reasonable attorney fees.⁴ All three elements have to be present. An employer who drafts aggressive terms in good faith won’t trigger this. An employer who knowingly uses overbroad terms as leverage, counting on reformation to rescue it, takes on real exposure.

One related point on tolling clauses that pause the restricted period during a violation: at least one federal court in Texas has found such clauses create an unreasonable indefinite restriction, though courts have occasionally been willing to equitably extend a noncompete’s duration where the employee engaged in continuous violations or litigation delays consumed most of the restricted period. Assume tolling faces a tough challenge, but is not categorically dead.

Remedies When an Employee Actually Breaches

When a valid noncompete is breached, Section 15.51(a) authorizes injunctive relief, monetary damages, or both.⁴ Most employers start by asking for a temporary restraining order or preliminary injunction to stop the competitive activity immediately.

Money damages are harder. The employer has to prove lost profits directly caused by the employee’s competition — evidence connecting specific revenue losses to the former employee’s actions rather than to market conditions or unrelated business factors. Courts also distinguish between an employee competing and an employee simply working in the same industry. A former account manager who calls your clients is a much stronger damages case than one who takes a similar role at a competitor without soliciting your customers.

The burden of proof matters. When the noncompete’s primary purpose is securing personal services, which covers most employment agreements, the employer bears the burden of proving the noncompete meets Section 15.50’s standards. In sale-of-business noncompetes, that burden flips to the person challenging the restriction.⁴

Physician Noncompetes Follow Different Rules

Texas imposes specific requirements on noncompetes involving licensed physicians that go beyond the general standards. Section 15.50(b) reflects the state’s view that restricting a doctor’s ability to practice creates public health consequences that don’t exist in ordinary commercial disputes.¹

A physician noncompete must satisfy all of the following:

Allow the physician to buy out of the noncompete for an amount no greater than the physician’s total annual salary and wages at the time the contract or employment ends.
Not deny the physician access to a list of patients they saw or treated within one year before termination.
Preserve the physician’s access to patients’ medical records upon the patient’s authorization, with copies available for a reasonable fee set by the Texas Medical Board. Records need not be provided in a different format than how they were maintained unless both parties agree.
Not prevent the physician from continuing to treat a specific patient during an acute illness, even after the contract has ended.
Expire no later than one year after termination.
Restrict practice within no more than a five-mile radius from the location where the physician primarily practiced.
Be clearly and conspicuously stated in writing.

These conditions are non-negotiable. A physician noncompete that omits the buyout provision or exceeds the five-mile radius is unenforceable on its face, no matter how reasonable the other terms look.¹

Sale-of-Business Noncompetes Get More Deference

Noncompetes tied to the sale of a business receive significantly more deference than employment noncompetes. When someone sells a company, part of what the buyer pays for is goodwill: customer relationships, reputation, and market position. If the seller could open a competing business next door the following week, the buyer would have paid for something it didn’t receive.

That difference shows up two ways. Courts allow broader restrictions in time, geography, and scope for sale-of-business noncompetes. A five-year restriction covering an entire metropolitan area may be reasonable in a business sale and unreasonable in an employment context. And Section 15.51(b) flips the burden of proof so that the person challenging the restriction has to show it’s unreasonable.⁴

The FTC’s National Ban Is Not in Force

In April 2024 the Federal Trade Commission issued a final rule that would have banned nearly all noncompete agreements nationwide as an unfair method of competition under Section 5 of the FTC Act.⁵ It never took effect. A federal court in the Northern District of Texas invalidated it in August 2024, finding the FTC exceeded its authority and acted arbitrarily and capriciously. In September 2025 the FTC moved to dismiss its appeals and accede to the vacatur.⁶ Texas state law governs. Do not rely on the FTC rule as a defense or a reason to disregard an existing noncompete.

Confidentiality Agreements as a Related Tool

Many of the interests employers try to protect through noncompetes can also be protected through confidentiality or nondisclosure agreements, which face a lower bar for enforcement in Texas. A confidentiality agreement that identifies the protected information and limits what an employee can share is generally easier to enforce than a broad restriction on where the employee can work.³ For employers, a well-drafted confidentiality agreement can do double duty as both standalone protection and the “otherwise enforceable agreement” that anchors a noncompete under Section 15.50. For employees, even if a noncompete turns out to be unenforceable, the confidentiality obligations tied to it may survive independently.

1
State of Texas. Texas Business and Commerce Code 15.50 – Criteria for Enforceability of Covenants Not to Compete
2
FindLaw. Alex Sheshunoff Management Services v. Johnson (2006)
3
Texas Workforce Commission. Conflict of Interest, Trade Secrets, Non-Competition Agreements
4
State of Texas. Texas Business and Commerce Code 15.51 – Procedures and Remedies in Actions to Enforce Covenants Not to Compete
5
Federal Trade Commission. FTC Announces Rule Banning Noncompetes
6
Federal Trade Commission. Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule