How to Draft a Non-Compete Agreement That Complies With Texas Business and Commerce Code § 15.50 (2026 Update)
Texas non-competes are enforceable only if they satisfy Texas Business & Commerce Code § 15.50, including being ancillary to an otherwise enforceable agreement and reasonable in scope. In 2026, Texas courts continue to scrutinize consideration, protectable interests, and overbreadth—and will reform some defective clauses. This update explains how to draft (and revise) a Texas-compliant non-compete with practical clause guidance, examples, and litigation-proofing tips.
Why Texas non-competes fail (and how § 15.50 fixes the playing field)
Texas is not a blanket “non-competes are void” state. Instead, Texas Business & Commerce Code § 15.50 creates a specific enforceability framework: a covenant not to compete is enforceable only if it is (1) ancillary to or part of an otherwise enforceable agreement at the time the agreement is made, and (2) contains reasonable limitations as to time, geographic area, and scope of activity to be restrained, and the restraint does not impose a greater restraint than necessary to protect the employer’s goodwill or other business interest.
Most drafting failures occur in three places: (a) the agreement lacks valid consideration tied to a protectable interest (for example, no real access to confidential information), (b) the restriction is broader than the employee’s actual role (especially “any business anywhere” prohibitions), or (c) the drafter assumes the court will “fix it” without consequences. Texas courts can reform overbroad restraints, but reformation can limit remedies and leverage in litigation.
Section 15.50’s enforceability elements in plain English
1) “Ancillary to or part of an otherwise enforceable agreement”
In practice, this means the non-compete must be tied to a valid contract that includes enforceable promises on both sides. The non-compete cannot stand alone as a bare restraint; it must be linked to an agreement where the employer provides something of value that justifies the restriction.
Common “otherwise enforceable agreements” include:
• Confidentiality / proprietary information agreements (where the employer promises access to confidential information and actually provides it).
• Agreements providing specialized training (where the training is real, valuable, and tied to the employee’s services).
• Stock option, equity, or incentive agreements (particularly where they include confidentiality, IP assignment, or access to strategic information).
• Employment agreements with enforceable terms, paired with confidentiality or trade-secret protections.
Drafting note: Merely labeling information “confidential” is not enough. Your agreement should define categories of confidential information and align them with what the employee will actually see or use.
2) Reasonable limits on time, geography, and scope
Texas evaluates reasonableness based on the employer’s legitimate business interests, including protection of goodwill (customer relationships) and confidential information. “Reasonable” is fact-specific, but the drafting goal is always the same: match the restraint to the employee’s job, territory, customer exposure, and access level.
3) No greater restraint than necessary
Even if time, territory, and scope are stated, the clause can still fail if it restricts more conduct than necessary to protect goodwill or other business interests. Overbreadth often appears in scope of activity (“any capacity”), or in geographic clauses that exceed the employee’s real market footprint.
Step-by-step: drafting a Texas-compliant non-compete in 2026
Step 1: Identify the protectable interest and draft to it
Before writing restrictions, document (internally and in the agreement) what you are protecting:
Protectable interest examples:
• Trade secrets (pricing formulas, source code, technical specifications, manufacturing methods).
• Confidential information (customer requirements, margin data, pipeline, proprietary playbooks).
• Goodwill (customer relationships cultivated on the company’s time and expense).
Drafting technique: add a short “purpose” recital that ties the restraint to the interest. Courts are skeptical of generic recitals, but a tailored statement helps: identify the employee’s role, anticipated access, and why that access requires post-employment restraint.
Step 2: Build the “otherwise enforceable agreement” foundation
Pair the non-compete with one or more enforceable obligations. Most commonly:
Confidentiality promise + access grant. Include the employer’s promise to provide access to defined confidential information as needed for the role, and the employee’s promise to protect it during and after employment.
Training promise + repayment/return obligations (if appropriate). If you rely on training as consideration, describe it with specificity (type, duration, content). Vague “training” references are less persuasive than a clear description of specialized instruction.
IP assignment + invention disclosure. For engineering, software, product, and R&D roles, pair the non-compete with IP obligations that explain why competitive restrictions are necessary to protect proprietary development.
Practice pointer for attorneys: Make the employer’s promise non-illusory. If the agreement says “Company may, in its sole discretion, provide confidential information,” that can undermine “otherwise enforceable” status. Use a commitment tied to job necessity (e.g., “Company will provide access as reasonably required for Employee’s duties”).
Step 3: Draft narrow, role-based scope of restricted activities
The safest scope restrictions are activity-based and tied to the employee’s actual work. Avoid “in any capacity” bans unless the employee truly operated across the entire business (rare).
Better scope language (example):
“Employee shall not, for the Restricted Period, perform services that are the same as or substantially similar to the services Employee performed for the Company in the last twelve (12) months of employment, for a Competing Business, within the Restricted Territory.”
High-risk scope language (what to avoid):
“Employee shall not be employed by, consult for, own, manage, operate, control, or participate in any business that competes with the Company in any capacity.”
Texas courts often view “any capacity” as broader than necessary for most employees. A better approach is to prohibit competitive roles that implicate confidential information or goodwill—sales to the same accounts, product development in the same product line, or strategic leadership in a directly competing segment.
Step 4: Set a defensible time period
Time must be no longer than necessary to protect the interest. There is no universal “Texas default,” but common drafting ranges in Texas disputes are 6 to 24 months, depending on role and industry. The more sensitive the information and the longer its shelf life, the more support for longer durations—provided the scope and geography are also tight.
Examples:
• 6–12 months: account executives, recruiters, operations managers with customer contacts.
• 12–24 months: senior sales leaders, executives, engineers with strategic roadmaps or long-cycle product plans.
Drafting tip: Explain why the time period fits the business. For example, “sales cycles average 9–12 months” or “product roadmaps are planned 18 months ahead.” This matters in injunction hearings.
Step 5: Define a realistic geographic territory (or use customer-based alternatives)
Texas requires a reasonable geographic limitation or a limitation that functions similarly (e.g., customer-based restrictions). Drafting geography is easiest when the employee had a defined territory; it is harder for remote and national roles.
Geographic options that tend to be more defensible:
• The employee’s sales territory as of termination.
• Counties or metros where the employee actually worked or managed accounts.
• A radius around a facility when the business is location-based.
Customer-based alternative: Instead of (or in addition to) a large territory, prohibit competitive services to customers the employee had material contact with in a defined lookback period (e.g., last 12–24 months). This often aligns more directly with goodwill protection and is easier to prove.
Integrating non-solicitation and confidentiality to reduce non-compete risk
In Texas, many employers overuse non-competes where narrower tools would work better. A well-drafted package can reduce litigation risk while still protecting the business.
Customer non-solicitation
A customer non-solicit can be easier to defend if it is tied to accounts the employee actually touched and limited in time. Define:
• “Customer” or “prospective customer” narrowly (e.g., active customers in last 12 months).
• “Solicit” clearly (initiating contact for competitive services).
• “Material contact” threshold (meetings, proposals, negotiations, servicing).
Employee/raid non-solicitation
If protecting your workforce is key, draft a non-solicit limited to employees the departing worker supervised or worked closely with. Overbroad “no employee anywhere” clauses can be attacked as greater than necessary.
Confidentiality and trade secret protections
Confidentiality is often the real interest behind the non-compete. Strengthen definitions, security obligations (return of devices, deletion attestations), and remedies. For roles with code, data, or R&D, include audit/verification tools and clear ownership provisions.
Reformation (“blue penciling”) under Texas law: helpful, but not a free pass
Texas allows courts to reform an overbroad covenant to the extent necessary to make it reasonable and enforceable. This is useful, but it is not a drafting strategy.
Practical consequences of relying on reformation:
• Reduced leverage at the TRO stage. If the court believes the covenant is over
