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How to Draft an Enforceable Non-Compete Agreement in Texas After the 2024 FTC Ban Attempt Explained

Texas non-competes remain enforceable in 2026 if they meet the Texas Covenants Not to Compete Act’s requirements—despite the FTC’s 2024 attempted nationwide ban. The federal rule was challenged immediately, and Texas employers still primarily rely on state law and recent case guidance. This article explains how to draft an enforceable Texas non-compete after the FTC ban attempt, with practical drafting steps, pitfalls, and examples.

Texas employers and high-growth companies continue to use non-compete agreements as a business risk management tool—especially for employees with customer relationships, pricing strategy access, sales pipelines, product roadmaps, and proprietary processes. The FTC’s 2024 attempt to ban most non-competes nationwide created uncertainty, but it did not rewrite Texas law overnight. For Texas attorneys advising employers (and for counsel representing departing employees), the drafting focus remains: comply with the Texas Covenants Not to Compete Act (“TCNCA”) and draft reasonable, defensible restrictions tied to legitimate business interests.

1) Where things stand after the FTC’s 2024 non-compete ban attempt

In 2024, the Federal Trade Commission issued a final rule that would have prohibited most employee non-competes nationwide. The rule immediately faced legal challenges in federal court, and its enforceability became uncertain. Regardless of the federal litigation posture, Texas non-compete enforceability continues to turn on state statute and Texas appellate guidance in the ordinary course—because Texas courts apply the TCNCA framework and evaluate reasonableness and ancillary consideration.

For drafting and enforcement strategy, the practical takeaway is straightforward: assume your agreement will be judged under Texas law, and draft it as if it will be scrutinized by a Texas judge for (1) statutory compliance, (2) reasonableness, and (3) a clear link to protecting goodwill and confidential information rather than suppressing ordinary competition.

2) The Texas enforceability checklist (TCNCA essentials)

Texas Business & Commerce Code Chapter 15 governs covenants not to compete. While case law supplies nuance, most enforceability disputes revolve around a few recurring requirements.

A. Make the non-compete “ancillary to or part of” an otherwise enforceable agreement

A Texas non-compete cannot stand alone. It must be tied to an otherwise enforceable agreement—most commonly an employment agreement that includes enforceable promises such as confidentiality, trade secret protection, or the provision of specialized training.

Drafting tip: Do not bury consideration in vague boilerplate. Create a clear, enforceable exchange: the employer provides access to confidential information/trade secrets and/or specialized training; the employee agrees to protect that information and accept a limited non-compete.

B. Ensure the employer gives consideration that “gives rise” to the restraint

Texas courts commonly focus on whether the employer’s promise (and actual performance) supports the need for the restraint—e.g., providing confidential information that could be used to unfairly compete. A promise to provide confidential information can work if the employer actually provides it.

Practical drafting move: Tie the restrictive covenant to specific categories of confidential information the role will receive (customer pricing, renewal data, source code access, technical designs, sales playbooks). Consider documenting that access in onboarding or role-based access controls.

C. Keep time, geographic area, and scope “reasonable”

The statute requires limitations as to time, geography, and scope of activity that are reasonable and no greater than necessary to protect legitimate business interests. Texas courts will not enforce overreach just because the parties signed it. The narrower and more role-based the restriction, the better your odds.

D. Expect reformation—but don’t rely on it

Texas courts may “reform” an overbroad non-compete to make it reasonable. However, reliance on reformation is risky because it can limit recoverable damages for pre-reformation periods and may weaken enforcement leverage. Draft to win on day one.

3) Step-by-step: how to draft an enforceable Texas non-compete

Step 1: Start with the business interest you are actually protecting

Texas non-competes are strongest when they protect:

Trade secrets and confidential information (technical, financial, strategic, operational)
Goodwill (customer relationships, vendor relationships, reputation tied to a salesperson/account manager)
Specialized training that is more than generalized orientation

Write your agreement so a judge can quickly see the “why.” Avoid stating the purpose as “prevent competition.” Instead, frame it as “prevent unfair competitive use of protected information and relationships.”

Step 2: Pair the non-compete with enforceable confidentiality and IP provisions

A common drafting failure is treating confidentiality as an afterthought. In Texas, a well-drafted confidentiality obligation is often the “anchor” that makes the non-compete ancillary to an enforceable agreement.

Include:

A clear definition of “Confidential Information” and “Trade Secrets” (and exclude publicly available information)
Use and non-disclosure restrictions during and after employment
Return-of-property and deletion obligations at separation
Invention assignment/IP ownership clauses where appropriate

Example definition (short form): “Confidential Information includes non-public information regarding customers, pricing, margins, bids, product roadmaps, technical specifications, source code, security procedures, and business strategies, whether in written, electronic, or oral form.”

Step 3: Draft role-based activity restrictions (not industry-wide bans)

Overbroad “you may not work in this industry” clauses are prime targets. A better approach restricts competitive activities that mirror the employee’s actual role and risk profile.

Stronger: “Employee will not perform sales or account management services for a Competing Business to customers Employee serviced or learned confidential information about.”

Weaker: “Employee will not work for any competitor in any capacity.”

Role-based drafting demonstrates necessity and makes reformation less likely.

Step 4: Calibrate duration to the role and the shelf-life of the information

Texas courts regularly evaluate whether the time period matches how long the information remains competitively sensitive and how long it takes to transition customer goodwill.

Common ranges:

6–12 months for many sales/customer-facing roles
12–24 months for senior executives with deep strategy access

Draft with an internal rationale: customer renewal cycle, sales pipeline duration, product release cycles, or development timelines.

Step 5: Define geography intelligently (or use customer-based limits where appropriate)

“Statewide” or “nationwide” restrictions may be defensible for truly national roles, but they often read as overreach for local or regional employees. Texas courts look for a logical connection between territory and business activity.

Options:

Territory tied to actual sales region (e.g., counties, metro area, assigned multi-state region)
Customer-based restrictions (e.g., customers the employee serviced or had material contact with in the last 12 months)

Customer-based limits can sometimes reduce geographic fights because they target goodwill and relationships rather than a map boundary.

Step 6: Write clear definitions: “Competing Business,” “Restricted Period,” “Restricted Customers”

Ambiguity fuels litigation. Define key terms precisely:

Competing Business: identify the product/service category, not a list of every potential competitor
Restricted Customers: customers/prospects with whom the employee had material contact or about whom they learned confidential information
Material contact: meetings, calls, proposals, negotiations, account responsibility, access to CRM notes

Step 7: Add enforcement tools that Texas courts expect

Non-competes are enforced through injunctions and damages. A few clauses can improve enforcement posture:

Injunctive relief clause: acknowledge irreparable harm and that injunction is appropriate
Tolling clause: extend the restricted period for time in breach (subject to judicial scrutiny)
Attorney’s fees: consider fee-shifting consistent with Texas law and your overall risk strategy
Severability and reformation: expressly authorize reformation to the maximum extent permitted
Forum/venue selection: Texas venue where enforceable and strategically appropriate

4) Texas-specific drafting pitfalls that frequently break enforceability

Pitfall A: Using “continued employment” as the only consideration without documenting access

Texas non-competes often survive when tied to confidentiality/training and the employee actually receives what was promised. If your agreement relies on “continued employment” alone, you invite a consideration challenge. Build the record: what confidential systems, customer lists, pricing data, or training modules does the employee receive?

Pitfall B: Defining “Confidential Information” so broadly it becomes meaningless

“Everything about the business” can read as unreasonable. Exclude information that is publicly known, independently developed, or lawfully obtained. Reasonable definitions look more enforceable and are easier to police.

Pitfall C: Banning employment “in any capacity” with a competitor

Prohibiting a former salesperson from becoming a competitor’s janitor is the classic overbreadth example. Restrict competitive activities aligned to the employee’s duties and risk, not their mere employment.