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How to Draft an Enforceable Non-Compete Agreement for Texas Employees in 2026 Under the FTC Rule Changes

Texas non-competes remain enforceable in 2026 only if they satisfy the Texas Covenants Not to Compete Act (TCCNCA) and can be justified under the FTC’s evolving federal posture. Employers face heightened scrutiny because FTC rule changes and ongoing litigation have narrowed the practical room for broad restraints. This article explains how to draft a Texas employee non-compete that is enforceable, tailored, and compliant—plus what to use instead when it’s not.

What Changed in 2026: The FTC Rule Landscape vs. Texas Enforceability

Texas has long enforced reasonable non-compete agreements under the Texas Covenants Not to Compete Act (“TCCNCA”), found in Texas Business & Commerce Code Chapter 15. In 2026, employers and counsel must draft with a new layer of risk: federal regulatory pressure from the Federal Trade Commission (FTC) and litigation over the FTC’s non-compete rulemaking.

Key drafting takeaway: even when Texas law supports enforceability, a non-compete that is overbroad, punitive, or not tied to legitimate protectable interests is more likely to trigger challenges—whether in court, in agency scrutiny, or in business negotiations (investors, acquirers, and HR auditors now routinely ask about restrictive covenant compliance).

Practical compliance stance for 2026: draft Texas non-competes as if they must survive (1) strict state-law reasonableness review and (2) a “least restrictive means” business justification. That approach reduces litigation exposure regardless of how federal challenges ultimately resolve.

The Texas Legal Standard: The Two-Part Test Under the TCCNCA

In Texas, a non-compete is enforceable only if it meets the TCCNCA’s core requirements. Courts typically analyze enforceability in two steps:

1) The non-compete must be “ancillary to or part of” an otherwise enforceable agreement

This is the gatekeeper. The non-compete cannot stand alone; it must be tied to an enforceable agreement where the employer provides something of value that justifies the restraint.

Common “otherwise enforceable” agreements include:

• Confidentiality/trade secret agreements (especially where the employer provides access to confidential information)
• Agreements providing specialized training (careful: the training must be real, valuable, and connected to the restraint)
• Stock option/equity agreements in some contexts (often paired with confidentiality and IP protections)

Drafting tip: The agreement should clearly state what the employee receives (e.g., access to customer pricing, margin data, account plans, product roadmaps, or proprietary methods) and tie the non-compete to protecting those interests.

2) The restraint must be reasonable in time, geographic area, and scope of activity

Texas courts will not enforce a non-compete that is broader than necessary to protect the employer’s goodwill or other legitimate business interests, such as trade secrets. “Reasonable” depends on role, industry, customer footprint, and the sensitivity of information.

Drafting tip: Treat “reasonable” as a fact-based, job-specific design requirement—not a standard template.

Drafting Checklist: Clauses That Make a Texas Non-Compete More Enforceable in 2026

1) Start with a strong “ancillary” foundation: confidentiality + access

A common drafting error is to attach a generic confidentiality paragraph and assume it supports the non-compete. In 2026, counsel should draft a robust confidentiality and proprietary information section that:

• Defines confidential information with specificity (pricing, customer requirements, vendor terms, sales playbooks, proprietary tools, source code, roadmap, security protocols).
• Explains access (“Employee will have access to…”).
• States the purpose (to protect trade secrets/goodwill).
• Includes return/destruction obligations on separation.
• Addresses electronic materials (cloud accounts, personal devices, MFA tokens, forwarding rules).

Example (better than “all company information”): “Confidential Information includes customer-specific pricing tiers, renewal and churn forecasts, negotiated vendor rebates, and product feature roadmaps not publicly released.”

2) Define the restricted activities, not the employee’s entire occupation

Texas courts are more comfortable enforcing restrictions that target competitive conduct tied to the employee’s role rather than a blanket ban on working in an industry.

Better: prohibit performing the same or similar services for a competitor that would use the employer’s confidential information or customer relationships.
Riskier: “Employee shall not work for any competitor in any capacity.”

Drafting tip: Describe “Restricted Services” using the employee’s actual job functions (e.g., “enterprise SaaS sales to healthcare providers,” “management of top-50 accounts,” “development of X module,” “pricing strategy for Y product line”).

3) Use a defensible time period (and justify it)

Texas cases often treat 6–12 months as more defensible than longer periods, especially for sales and client-facing roles, though longer terms can be justified for executives with deep strategic access.

2026 best practice: include a brief business rationale in the agreement or supporting documentation (onboarding memo, role description) explaining why the chosen term matches the lifecycle of the information or customer relationships (e.g., annual contracting cycles, renewal windows, product release schedules).

4) Draft the geographic scope based on where the employee actually worked or influenced business

Texas still cares about geography, but geography can be defined in modern ways when customers are dispersed. The key is avoiding an untethered “worldwide” restriction unless truly justified.

More enforceable options:

• Territory-based: counties/metros where the employee operated.
• Account-based: customers/prospects the employee served or had material contact with.
• Region-based: states where the employee had sales responsibility.

Example: “Restricted Territory means the counties in Texas in which Employee actively solicited customers during the last 12 months of employment.”

5) Add a “blue pencil” / reformation-ready structure

Texas allows courts to reform (modify) an overbroad non-compete in many situations, but overreaching can still be costly. Drafting to facilitate reformation can reduce risk.

Drafting elements that help:

• Separate definitions for time, territory, and restricted services.
• A clause acknowledging reformation if a court finds a term overbroad.
• Tiered alternatives (e.g., primary territory definition + fallback narrower definition).

6) Include clear consideration and timing (especially for current employees)

For new hires, the offer of employment plus access to confidential information often supports the “ancillary” requirement when properly drafted. For existing employees, employers should be careful: simply continuing employment may not cure a weak ancillary foundation.

2026 best practice: document the employee’s receipt of new consideration tied to the restrictions—expanded access, promotion, raise, bonus eligibility, specialized training, equity grant—paired with a confidentiality commitment.

7) Choose strong forum, venue, and injunctive relief provisions (but keep them fair)

Because non-compete disputes are time-sensitive, agreements typically include:

• Texas governing law (when appropriate).
• Venue selection (county of headquarters or where the employee worked).
• Injunctive relief language acknowledging irreparable harm and permitting temporary restraining orders.

Caution: Overly one-sided fee-shifting or oppressive venue choices can make litigation uglier and settlement harder. Draft for enforceability, not intimidation.

FTC Rule Changes: How to Draft to Reduce Federal Risk Without Guessing the Outcome

The FTC’s non-compete initiative has created uncertainty nationwide. Regardless of whether specific FTC rules are fully effective at any given moment (due to litigation and injunctions), prudent counsel should draft with the assumption that broad non-competes may be disfavored and that businesses should rely more on narrower, interest-based restrictions.

Practical steps that help under either regime:

1) Make the non-compete the last resort—and say so in the agreement’s recitals (e.g., the restraint is limited to what is necessary to protect trade secrets and goodwill).
2) Narrow the clause to trade-secret risk (restricted services tied to confidential information).
3) Favor customer/account-based limits over “any competitor” lists.
4) Strengthen alternatives (confidentiality, non-solicitation, invention assignment, return-of-property, and garden leave where viable).