Texas law permits the enforcement of covenants not to compete, but only under specific statutory conditions. The Texas Covenants Not to Compete Act, codified in the Texas Business and Commerce Code, requires that such covenants be tied to an otherwise enforceable agreement and be reasonable in their restrictions regarding time, geography, and scope of activity, so as not to impose a greater restraint than necessary to protect legitimate business interests.
Courts in Texas have consistently interpreted and applied these statutory requirements, emphasizing that noncompete agreements are generally disfavored as restraints of trade unless they meet the statutory criteria. If a covenant is overbroad, Texas courts are required to reform it to make it reasonable, rather than voiding it outright. There are also specific statutory provisions for certain professions, such as physicians, which impose additional requirements and limitations.
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What is a covenant not to compete?
It’s a contract where an employee agrees not to work for a competitor or start a competing business for a certain period of time after leaving a job.
What does Texas law say?
Texas allows these agreements, but only if they are fair and reasonable. For a noncompete to be enforceable in Texas:
- It must be part of a valid contract.
The noncompete can’t stand alone—it has to be tied to another agreement, like an employment contract where the employer gives the employee something valuable (such as access to confidential information or special training). - It must be reasonable.
The restrictions can’t be too broad. The agreement should only last as long as necessary (for example, one or two years), cover only the area where the employee actually worked, and limit only the type of work that could truly compete with the employer. - It must protect a legitimate business interest.
The employer must have a real reason for the restriction, like protecting trade secrets, confidential information, or customer relationships.
What if the agreement is too broad?
If a noncompete is too strict (for example, it covers too much time or too large an area), Texas courts won’t throw it out completely. Instead, they will change it to make it reasonable and then enforce the revised version.
Are there special rules for certain jobs?
Yes. For example, doctors have extra protections under Texas law. Noncompetes for physicians must meet additional requirements, such as allowing the doctor to buy out of the agreement and limiting how long and how far the restriction applies.
Conclusion
Covenants not to compete are enforceable in Texas if they comply with the requirements of the Texas Covenants Not to Compete Act. The covenant must be ancillary to an otherwise enforceable agreement and must contain reasonable limitations as to time, geographic area, and scope of activity, tailored to protect legitimate business interests. Overbroad covenants are subject to judicial reformation, and special rules apply to certain professions, such as physicians. The statutory framework is exclusive and preempts prior common law, and the burden is on the employer to prove enforceability. Texas courts have consistently applied these principles, and the enforceability of any particular covenant will depend on the specific facts and circumstances of the case.
If you have a specific agreement you’re concerned about, consult an attorney who can review your situation.
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