Texas Non-Compete Enforceability in 2026: A Drafting Playbook

Picture a hypothetical. A Houston software company hires fifteen sales reps across Austin, Houston and Dallas. Each signs a covenant that runs two years, covers the whole country, bars work on "any competing product," and says nothing about what the company gives the rep in return. The company's GC says it holds "because we're in Texas."

Maybe. But the statute treats overreach in a specific way, and that way makes aggressive drafting a worse bet than disciplined drafting. If a court has to rewrite the covenant, the employer recovers no damages for breaches before the rewrite, and it can end up paying the employee's legal fees.

Short answer: yes, non-competes are enforceable in Texas. A covenant holds when it is ancillary to or part of an otherwise enforceable agreement and its limits on time, geographic area and scope of activity are reasonable (Tex. Bus. & Com. Code 15.50(a)). The statute sets no fixed number of months or miles, so a court decides reasonableness on the facts. If the limits are too broad, the court must reform the covenant and enforce it as reformed, but it may not award the employer damages for a breach before the reformation (15.51(c)). Physicians, and since September 1, 2025 dentists, nurses and physician assistants, get extra statutory protection.

Reviewed and corrected on 11 October 2026. This is general information, not legal advice; check the cited statute or opinion before relying on it.

TL;DR

• Texas enforces post-employment non-competes under Tex. Bus. & Com. Code 15.50, but only when the covenant is "ancillary to or part of an otherwise enforceable agreement" and reasonable in time, geographic area and scope of activity.
• The foundational case is Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642 (Tex. 1994). Alex Sheshunoff Management Services v. Johnson, 209 S.W.3d 644 (Tex. 2006), eased the at-will problem, and Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011), modified Light: consideration only has to be "reasonably related" to a protectable interest.
• Under 15.51(c) a court must reform an overbroad covenant, but it "may not award the promisee damages for a breach of the covenant before its reformation," and in a personal-services case it may make the employer pay the employee's costs and attorney's fees.
• The Texas Business Court generally has no jurisdiction over a claim arising out of the Covenants Not to Compete Act (Tex. Gov't Code 25A.004(g)(2)(A)). Most non-compete suits stay in district court.
• The FTC non-compete rule is gone: a federal court in the Northern District of Texas set it aside in 2024, the FTC dropped its appeals in September 2025, and the FTC removed the rule from the Code of Federal Regulations on February 12, 2026.
• SB 1318, effective September 1, 2025, tightened the physician rules in 15.50 and added 15.501 for dentists, professional and vocational nurses and physician assistants.

Part of our state law reference series.

Official text, as of 11 October 2026

Tex. Bus. & Com. Code 15.50(a) makes a covenant not to compete enforceable if it is "ancillary to or part of an otherwise enforceable agreement at the time the agreement is made," to the extent its time, geographic and scope limits are reasonable and no greater than necessary to protect the promisee's goodwill or other business interest.

Section 15.51(c) says the court "may not award the promisee damages for a breach of the covenant before its reformation and the relief granted to the promisee shall be limited to injunctive relief."

Source: the Texas Legislature's statutes site, Business & Commerce Code chapter 15, read on 11 October 2026.

What changed in 2025 and 2026. SB 1318 (89th Legislature) amended 15.50 and 15.52 and added 15.501, effective September 1, 2025, and it applies only to covenants entered into or renewed on or after that date. On February 12, 2026 the FTC removed its non-compete rule from the Code of Federal Regulations (91 FR 6507).

The statutory framework: 15.50 to 15.52

The Texas Covenants Not to Compete Act is Subchapter E of Chapter 15 of the Business and Commerce Code. It is four sections: 15.50, 15.501, 15.51 and 15.52.

Section 15.50(a) sets the general standard. A covenant is enforceable if it is "ancillary to or part of an otherwise enforceable agreement at the time the agreement is made," and only to the extent its limits on time, geographical area and scope of activity are reasonable and "do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee."

Three independent ideas sit in that sentence. The covenant has to attach to something else (ancillary), the host agreement has to be enforceable in its own right, and the restrictions have to be reasonable in three dimensions.

Section 15.50(b) to (d) are the physician rules, and since September 1, 2025 they read differently than they did the day before. Section 15.501 is new and applies similar limits to dentists, professional and vocational nurses and physician assistants. Both are covered below.

Section 15.51 covers procedures and remedies. Subsection (b) puts the burden of proof on the employer when the main purpose of the underlying agreement is personal services (the promisee must establish that the covenant meets the 15.50 criteria), and on the promisor otherwise. Subsection (c) is the reformation rule. If the covenant is "found to be ancillary to or part of an otherwise enforceable agreement" but its limits are unreasonable, the court "shall reform" them to what is reasonable and enforce the covenant as reformed. A covenant that is not ancillary to an enforceable agreement never reaches that step.

Section 15.52 says the criteria in 15.50 and 15.501 and the procedures and remedies in 15.51 "are exclusive and preempt other law, including common law."

The Light v. Centel standard

The Texas Supreme Court's foundational case is Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642 (Tex. 1994). For a covenant to be ancillary to an otherwise enforceable agreement, Light required two things: "(1) the consideration given by the employer in the otherwise enforceable agreement must give rise to the employer's interest in restraining the employee from competing; and (2) the covenant must be designed to enforce the employee's consideration or return promise in the otherwise enforceable agreement."

The covenant in Light failed on the second prong. The court said the employer's promise to train the employee might involve confidential or proprietary information, but the employee had not promised in the agreement to keep any of it confidential, so the covenant was not designed to enforce a return promise. The court also described business goodwill and confidential or proprietary information as examples of interests worthy of protection.

Alex Sheshunoff Management Services, L.P. v. Johnson, 209 S.W.3d 644 (Tex. 2006), dealt with a different problem. An employer's promise to provide confidential information at will can look illusory when the agreement is signed. The Texas Supreme Court held that a unilateral contract can be formed and become enforceable once the employer performs, so the covenant can satisfy the Act's requirement of an otherwise enforceable agreement. The court departed from a footnote in Light to get there.

Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009), added another piece. When the nature of the job requires the employer to provide confidential information, the employer impliedly promises to provide it, and that can support the covenant. (A Houston court of appeals summarized the holding that way in the Vogelsang case discussed below.)

Then came Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011). The employee was a managing director who had received stock options and signed a two-year client and employee non-solicit. The court held that the consideration (stock options) was "reasonably related to the company's interest in protecting its goodwill," a business interest the Act recognizes. It said the old requirement that the employer's consideration "give rise to" the interest in restraining competition "is not anchored in the text of the Act," and that "it is appropriate to modify Light here." The court reversed and remanded, so whether the restrictions were reasonable was left for the trial court.

Marsh also settled that customer and employee non-solicitation covenants are treated as restraints of trade governed by the Act. They get the same section 15.50 analysis as a traditional non-compete.

The four-pillar enforceability test

Strip the statute to its operating parts and a Texas covenant needs four things. This framing is ours; the statute does not use the word "pillar."

Pillar one: ancillary to an enforceable agreement. The covenant cannot stand alone. It has to ride on a contract that is enforceable in its own right, with consideration reasonably related to a protectable interest. Common hosts are employment agreements (with confidential information, as in Mann Frankfort), equity grants (the Marsh fact pattern) and sale-of-business agreements.

Pillar two: reasonable as to time. The statute sets no maximum. Courts look at the facts. In Gallagher Healthcare Insurance Services v. Vogelsang, 312 S.W.3d 640 (Tex. App.-Houston [1st Dist.] 2009), the court enforced a two-year client restriction as written and wrote, "Two to five years has repeatedly been held as a reasonable time in a noncompetition agreement." It also pointed to evidence that the insurance contracts at issue lasted a year. A shorter period is easier to defend, but Texas does not treat twelve months as a line the statute draws or a court must apply.

Pillar three: reasonable as to geographic scope. Geography has to match where the employee actually worked or whose business the employee handled. The same Vogelsang court noted that a number of courts have treated a restriction limited to the employee's own clients as a reasonable alternative to a geographic limit.

Pillar four: reasonable as to scope of activity. The covenant should restrict what the employee actually did, not everything the employer does. In Vogelsang the covenant barred only work with the roughly 80 clients the employee had handled, and the court contrasted it with covenants that keep an employee out of the whole industry. A covenant that bars "any work for any competitor" invites the argument that it restrains more than necessary.

Reformation and blue-penciling under 15.51(c)

The statute says "reform," which is not the same as blue-penciling. Section 15.51(c) tells the court to reform the limits "to the extent necessary" to make them reasonable and to enforce the covenant as reformed. On its face that is employer-friendly.

Two things cut the other way. First, the court "may not award the promisee damages for a breach of the covenant before its reformation," and relief is "limited to injunctive relief." Second, in a personal-services case, if the employee shows that the employer knew when the agreement was signed that the limits were unreasonable and still tried to enforce more than was necessary, the court "may award the promisor the costs, including reasonable attorney's fees, actually and reasonably incurred" in defending the action.

Take a hypothetical employer that writes a twenty-four-month nationwide covenant covering all activities, and a court that later reforms it to twelve months, three counties and sales only. The employer can enforce the reformed covenant going forward. It cannot recover damages for breaches before the reformation, whatever the competitive harm in the meantime.

The practical lesson is to write the covenant you would actually want to enforce. The bar on pre-reformation damages turns reformation from insurance into a cost of overreach.

The FTC non-compete rule and Texas

For Texas employers the federal question is now settled. The FTC's Non-Compete Clause Rule, published at 89 FR 38342 (May 7, 2024), would have made it an unfair method of competition to enter into non-competes with workers on or after September 4, 2024. A federal court in the Northern District of Texas set it aside before it took effect: Ryan, LLC v. FTC, 746 F. Supp. 3d 369 (N.D. Tex. 2024). The FTC appealed to the Fifth Circuit (No. 24-10951). On September 5, 2025, the Commission voted 3 to 1 to dismiss its appeals in that case and in the Eleventh Circuit and to accede to the vacatur.

On February 12, 2026, the FTC removed the rule from the Code of Federal Regulations (16 CFR part 910), effective that day (91 FR 6507). The Texas statute described above was the operative law throughout.

For the covenants discussed here, the question is a state-law question.

Does the Texas Business Court hear non-compete cases?

Generally no. The Texas Business Court (Tex. Gov't Code chapter 25A) was created by HB 19 of the 88th Legislature (the act took effect September 1, 2023, the court itself was created on September 1, 2024, and the act applies to civil actions commenced on or after that date). It has civil jurisdiction concurrent with district courts in the categories the statute lists, including actions arising out of a qualified transaction, where the amount in controversy exceeds $5 million. HB 40 (2025) lowered that figure from $10 million to $5 million, effective September 1, 2025, and the amount in controversy "is the total amount of all joined parties' claims" (25A.004(i)).

But section 25A.004(g)(2)(A) says that, "Unless the claim falls within the business court's supplemental jurisdiction, the business court does not have jurisdiction of ... a claim arising out of ... Subchapter E, Chapter 15, and Chapter 17, Business & Commerce Code." Subchapter E, Chapter 15 is the Covenants Not to Compete Act, sections 15.50 to 15.52.

The exception is supplemental jurisdiction under 25A.004(f). If the Business Court already has jurisdiction over an action, it can reach a related claim, but a claim within its supplemental jurisdiction "may proceed in the business court only on the agreement of all parties to the claim and a judge of the division of the court before which the action is pending." If the parties do not agree, that claim goes forward in a court of original jurisdiction.

So a non-compete claim tied to, say, a sale-of-business dispute can reach the Business Court only as a related claim, and only with every party's agreement. A suit that rests only on a non-compete claim has no other way in, so on the text of the statute it stays in district court. That is our reading of 25A.004(f) and (g); we found no Business Court or appellate decision applying it to a non-compete claim in our October 2026 review. Plan the forum accordingly, and do not draft a deal on the assumption that the Business Court will hear the covenant claim.

For context, Energy Transfer LP v. Culberson Midstream LLC, 2024 Tex. Bus. 1 (Tex. Bus. Ct. 1st Div. Oct. 30, 2024), remanded to district court a case that had been filed there before September 1, 2024 and then removed. That is a procedural ruling and has nothing to do with non-competes, but it shows the court applying its statute strictly. Check its subsequent history before citing it.

Industry-specific notes

Healthcare practitioners. This is the area where Texas non-compete law changed most in the last year. SB 1318 amended 15.50, added 15.501 and amended 15.52, effective September 1, 2025. It applies only to a covenant "entered into or renewed on or after" that date. Older covenants stay under the law in effect when they were made or renewed.

For a physician (a person licensed by the Texas Medical Board), a covenant relating to the practice of medicine is enforceable against the physician if it complies with 15.50(b), which requires that the covenant:

• not deny the physician access to a list of patients seen or treated within one year of termination, and provide access to medical records on the patient's authorization (15.50(b)(1));
• provide for a buyout in an amount "not greater than the physician's total annual salary and wages at the time of termination" (15.50(b)(2));
• allow continuing care for a specific patient during the course of an acute illness (15.50(b)(3)); and
• expire not later than the one-year anniversary of termination, limit the geographic area to no more than a five-mile radius from the location where the physician primarily practiced, and state its terms clearly and conspicuously in writing (15.50(b)(4)).

Separately, new 15.50(d) provides that a physician covenant is "void and unenforceable" if the physician is involuntarily discharged without good cause. "Good cause" means "a reasonable basis for discharge of a physician from contract or employment that is directly related to the physician's conduct, including the physician's conduct on the job or otherwise, job performance, and contract or employment record." For physicians, "the practice of medicine" does not include managing or directing medical services in an administrative capacity (15.50(b-1)).

New 15.501 covers dentists, professional and vocational nurses licensed under Chapter 301 of the Occupations Code, and physician assistants licensed under Chapter 204. A covenant against one of them is unenforceable unless it provides a buyout of no more than total annual salary and wages, expires within one year, is limited to a five-mile radius from where the practitioner primarily practiced, and states its terms clearly and conspicuously in writing. Section 15.501 has no good-cause voiding rule and no administrative-role carve-out like 15.50(b-1).

Health-care employers should treat these covenants as their own template rather than a variant of the general employee covenant.

Sales and executive roles. The statute does not distinguish by job title, and the sections below are our drafting suggestions, not law. The cases to start from are Vogelsang (a client-based restriction in place of geography, two-year term, evidence about the length of the client contracts) and Marsh (equity as consideration tied to goodwill). Tie geography or client lists to what the employee actually handled, tie scope to the products or services the employee actually sold or ran, and define the competing business concretely. A phrase like "any business competitive with the Company" leaves the scope open to attack.

Drafting calls

Duration. The statute sets no number, and Texas appellate courts have enforced two-year restrictions as written (Vogelsang), so twelve months is a conservative choice and no legal minimum. A shorter term is easier to defend and leaves less exposure under the 15.51(c) fee provision. Ask whether the employer would still want the covenant at the shorter term. If yes, write the shorter term.

Geography. Tie it to the territory or client list the employee actually handled. A formula such as "the counties in which the employee provided services during the final twelve months of employment" flexes with the facts. A nationwide restriction on a regional role invites a reformation fight, and reformation brings the 15.51(c) limit on damages.

Confidentiality recital versus equity. After Marsh, equity or another benefit reasonably related to a protectable interest can support the covenant. A confidentiality exchange still works, particularly under Mann Frankfort where the job requires confidential information. If you rely on it, make the exchange real (classification, access controls), because the employee's lawyer will test it.

Non-compete versus non-solicit. Marsh treated the non-solicit as covered by the Act, so it gets the same reasonableness analysis. Whether a narrower non-solicit holds up better in a given case is a judgment about the facts and no statutory rule.

Reformation clause. Include one. Section 15.51(c) requires reformation anyway, and the contractual clause records the parties' intent. It does not change the damages rule in 15.51(c).

A hypothetical to make this concrete. A Texas midstream operator signs a senior originator at $325,000 base plus $75,000 in restricted units. The first-instinct draft runs twenty-four months, statewide, and covers all hydrocarbon marketing. A disciplined draft ties the duration to the operator's documented sales cycle, limits geography to the counties along its pipeline footprint, and defines scope as "commercial origination of midstream services to producers in the Permian Basin and Eagle Ford."

The disciplined version is easier to defend at a preliminary injunction hearing. If a court has to reform the first draft, the employer gets the reformed covenant going forward and no damages for the period before reformation.

FAQ

Are non-competes enforceable in Texas? Yes. Texas enforces post-employment non-competes under Tex. Bus. & Com. Code 15.50 when the covenant is ancillary to or part of an otherwise enforceable agreement and the limits on time, geography and scope of activity are reasonable. If the limits are too broad, the court reforms the covenant, but the employer cannot recover damages for breaches before reformation.

How long can a Texas non-compete last? The statute sets no fixed cap. Courts decide whether the time limit is reasonable on the facts, and appellate courts have enforced two-year restrictions as written, for example in Gallagher Healthcare Insurance Services v. Vogelsang, 312 S.W.3d 640 (Tex. App.-Houston [1st Dist.] 2009). Shorter is easier to defend. Physician covenants are capped at one year after termination by 15.50(b)(4), and the same cap applies to dentists, nurses and physician assistants under 15.501.

What is the Texas Covenants Not to Compete Act? It is Tex. Bus. & Com. Code 15.50, 15.501, 15.51 and 15.52. Sections 15.50 and 15.501 set the enforceability criteria, 15.51 covers procedures and remedies (including reformation of overbroad covenants), and 15.52 makes those sections exclusive and preemptive of other law, including common law.

Can a Texas court rewrite an overbroad non-compete? Yes, once the covenant is found to be ancillary to or part of an otherwise enforceable agreement. Under section 15.51(c), the court "shall reform" the limits to what is reasonable and enforce the covenant as reformed. The catch is that it "may not award the promisee damages for a breach of the covenant before its reformation," and relief is limited to an injunction.

Can a non-compete case be heard in the Texas Business Court? Generally no. Tex. Gov't Code 25A.004(g)(2)(A) says the Business Court has no jurisdiction of a claim arising out of Subchapter E, Chapter 15 of the Business & Commerce Code (the non-compete statute) unless the claim falls within its supplemental jurisdiction. That requires the agreement of all parties to the claim and a judge of the division (25A.004(f)).

What is the leading Texas non-compete case? Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011), is the Texas Supreme Court's most important modern decision on consideration. It held that consideration need only be "reasonably related" to a protectable interest such as goodwill, and it modified the older "give rise to" test from Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642 (Tex. 1994). Alex Sheshunoff Management Services v. Johnson, 209 S.W.3d 644 (Tex. 2006), is the earlier case on at-will consideration.

Are physician non-competes enforceable in Texas? Yes, if they comply with 15.50(b), as amended by SB 1318 effective September 1, 2025: a buyout of no more than the physician's total annual salary and wages, a term of no more than one year, a geographic limit of no more than five miles from where the physician primarily practiced, patient-list, records and continuing-care terms, and clear written terms. Under 15.50(d) the covenant is void if the physician is involuntarily discharged without good cause. A new 15.501 applies the buyout, one-year, five-mile and writing limits to dentists, professional and vocational nurses and physician assistants.

Does a non-compete survive if the employee is fired? For most employees, yes. 15.50(a) and 15.501 contain no condition about why employment ended, and Texas does not require for-cause termination as a precondition. The exception is physicians: under 15.50(d), a physician covenant is void if the physician is involuntarily discharged without good cause.

Is a non-solicitation agreement treated the same as a non-compete in Texas? Both are analyzed under section 15.50. In Marsh, the Texas Supreme Court said covenants restricting solicitation of former employers' customers and employees are restraints on trade governed by the Act.

Compare neighboring regimes in our California, Florida, and Colorado guides, or see the full non-compete enforceability by state map.

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Arshita Anand

Co-Founder & CEO · Attorney

Arshita leads product and strategy at Vaquill AI, the US primary law data API. As an attorney, she decides which law we carry, how each section is sourced and cited, and what legal AI and compliance teams need from the data.