How to Draft a Texas Noncompete Agreement That Holds Up Under the Texas Covenants Not to Compete Act (2026)
Texas noncompete agreements are enforceable only if they satisfy the Texas Covenants Not to Compete Act, including being “ancillary to or part of” an otherwise enforceable agreement and containing reasonable limits on time, geography, and scope. Because courts can reform (but may also limit fee recovery), careful drafting matters as much as enforceability. This article explains the Act’s requirements, drafting steps, sample clauses to consider, and common pitfalls Texas attorneys should avoid in 2026.
Why Texas noncompetes fail: the Act is narrow, and judges read it closely
Texas does not treat noncompete clauses as ordinary contract terms. They are governed by the Texas Covenants Not to Compete Act (Texas Business & Commerce Code §§ 15.50–15.52), which creates a specific enforceability test and a unique remedy framework. In practice, most “bad” Texas noncompetes fail for one of three reasons: (1) the agreement is not properly anchored to an otherwise enforceable agreement, (2) the restrictions are not reasonable in time, geography, or scope of activity, or (3) the employer’s protectable interest is not clearly tied to what the restriction actually prohibits.
Good drafting is not just about winning an injunction. It is also about avoiding court-ordered reformation that narrows the covenant and limits recovery of attorneys’ fees. The Act incentivizes precision: the more tailored the restriction, the more likely the employer is to obtain meaningful relief quickly—and the less likely the employee is to succeed on defenses that frame the covenant as punitive rather than protective.
The enforceability framework under the Texas Covenants Not to Compete Act (2026)
1) The noncompete must be “ancillary to or part of” an otherwise enforceable agreement
Under § 15.50(a), a covenant not to compete is enforceable only if it is “ancillary to or part of” an otherwise enforceable agreement at the time the agreement is made. Texas courts typically look for a legitimate exchange: the employer provides something of value (commonly confidential information, trade secrets, specialized training, or stock-related consideration), and the noncompete is reasonably designed to protect that interest.
Drafting takeaway: don’t rely on generic “continued employment” language alone. Tie the noncompete to a specific set of enforceable promises and actual consideration—especially confidentiality, access, training, or incentive grants.
2) The limitations must be reasonable as to time, geographic area, and scope of activity
The Act requires restrictions that are no greater than necessary to protect the employer’s goodwill or other business interests. Texas courts examine:
Time. Many industries use 6–24 months, but reasonableness depends on role, sales cycle, customer relationships, and how quickly information becomes stale.
Geography. “Anywhere in Texas” or “nationwide” can be enforceable in limited circumstances (e.g., truly statewide/national responsibilities), but broad geographies often trigger reformation. A territory tied to the employee’s actual market, assigned accounts, or places where the employer does business during a defined lookback period is typically stronger.
Scope of activity. The restriction must match what the employee did and what poses a competitive threat. Preventing a former employee from working in any capacity for a competitor (including unrelated roles) is a common overreach. The strongest scope targets competitive activities that would use or exploit protected information or customer goodwill.
3) Courts can reform overbroad covenants—often at the employer’s expense
Texas courts may “reform” an overly broad covenant to make it reasonable and enforce it as reformed. That safety net is not a drafting strategy. Under § 15.51(c), if the covenant requires reformation, the employer’s ability to recover damages (and often attorneys’ fees) may be limited for the period before reformation, and litigation leverage can shift dramatically.
Drafting takeaway: draft as if you will be held to the precise text you wrote, not to what you hope a judge will rewrite later.
Step-by-step: drafting a Texas noncompete that aligns with the Act
Step 1: Start with the employer’s protectable interests (not a template)
Before drafting any restriction, identify the specific interest the covenant is intended to protect, such as:
Trade secrets and confidential information: pricing strategies, customer lists with non-public data, technical designs, source code, product roadmaps, proprietary processes.
Goodwill: customer relationships developed through the employer’s brand, sales support, and investment.
Specialized training: training that is unique, costly, and provides competitive advantage (not routine onboarding).
Then draft a covenant that tracks those interests. If the employee never handled customer relationships, a customer-based non-solicit may be stronger than a broad market-wide noncompete. If the employee is a technical architect with deep access to code, the scope can focus on competing products or technical roles that would predictably use that proprietary knowledge.
Step 2: Build an enforceable “anchor” agreement with real consideration
Texas employers often pair a noncompete with:
Confidentiality and trade secret obligations. Include clear definitions and affirmative duties: return of company data, no copying, no disclosure, and cooperation in protecting information.
Access promises. State that the employee will receive access to specific categories of confidential information or customer relationships as part of the job.
Training promises. Describe the training program, its proprietary elements, and why it provides competitive value.
Equity or incentive compensation. If using equity grants, ensure the grant documents and restrictive covenants cross-reference each other cleanly.
Example “anchor” language (conceptual): An agreement providing that the employee will receive access to defined confidential information and key customer relationships, coupled with enforceable confidentiality obligations, and a noncompete tailored to prevent using that access to compete.
Step 3: Define “Competitive Business” and “Competitive Activities” precisely
Vague definitions drive litigation. A strong Texas noncompete describes competition by reference to products/services and market segments, not by naming a list of “competitors” that changes monthly.
Better: “products or services substantially similar to or substitutable for Employer’s [defined products/services] offered to [defined customer types] in [defined territory].”
Worse: “any business that competes with Employer in any way.”
Also limit restricted activities to what matters. For a sales executive, restrict selling, managing sales teams, or servicing accounts in the relevant market. For a senior engineer, restrict designing or developing substantially similar products for a competitor—not “working for a competitor in any capacity.”
Step 4: Use time limits that reflect role and information “half-life”
Time should track business reality. Ask: how long does pricing remain sensitive? How long until customer contracts renew? How long until product roadmaps are public or obsolete?
Concrete examples:
6–12 months: inside sales roles with fast-moving pricing and shorter sales cycles.
12–18 months: account executives managing renewals and long-cycle enterprise sales.
18–24 months: senior leadership roles with strategic planning exposure and broad customer influence (still must be justified).
When in doubt, draft the shortest duration that genuinely protects the interest. Shorter, well-justified periods are more likely to be enforced quickly.
Step 5: Draft geography based on where the employee actually worked (and document it)
Texas courts often accept geographic limits tied to the employee’s territory, assigned accounts, or the locations where the employee had material responsibility. Consider drafting geography using one of these models:
Territory-based: counties or metro areas where the employee sold or managed relationships.
Customer-based (often stronger): restrictions keyed to customers the employee worked with during a lookback period, regardless of where those customers are located.
Hybrid: a defined territory plus named strategic accounts.
Example: “within 50 miles of any office where Employee primarily worked during the last 12 months” can be reasonable for on-site roles; “anywhere in the U.S.” may be overbroad unless the employee truly had nationwide responsibility and the company can show a legitimate nationwide interest.
Step 6: Add non-solicitation and non-interference provisions to reduce reliance on a broad noncompete
Many Texas disputes are really about customer poaching and team raids. Consider using narrower covenants that courts may view as more tailored:
Customer non-solicitation: prohibit soliciting customers or prospects the employee had material contact with (e.g., during the last 12–24 months).
Employee non-solicitation: prohibit soliciting or hiring employees the departing worker supervised or worked closely with.
Non-interference: prohibit inducing vendors or partners to terminate relationships.
These clauses often align more closely with goodwill and can reduce the need for aggressive geographic restrictions.
Step 7: Include clear remedies and a workable injunction clause (without overreaching)
Noncompete enforcement in Texas often moves fast—temporary restraining orders and temporary injunctions are common in trade secret and customer-raiding scenarios. Draft for that reality:
Injunctive relief language: acknowledge that breach may cause irreparable harm and that injunctive relief is appropriate. Avoid “automatic injunction” claims; courts still require proof, but well-written language helps frame the equities.
Tolling (use carefully): some agreements provide that the restricted period is extended by the time the employee is in breach. Courts may scrutinize tolling; if used, keep it reasonable and tied to proven breach periods.
Attorneys’ fees: Texas has specific rules around fee recovery in these cases; do not assume a fee clause overrides statutory limitations
