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How to Draft an Enforceable Non-Compete Agreement in Texas After the FTC Non-Compete Ban (2026 Guide)

Texas non-competes are still enforceable in 2026 if they comply with the Texas Covenants Not to Compete Act—even after the FTC’s rule targeting most worker non-competes. The practical reality is that Texas courts continue to scrutinize scope, geography, and consideration, and federal litigation over the FTC rule has shifted many employers toward narrower, trade-secret-focused covenants. This guide explains how to draft an enforceable Texas non-compete post-FTC, with compliant clauses, pitfalls, and examples.

What Changed After the FTC Non-Compete Ban—and What Didn’t in Texas

In 2024, the Federal Trade Commission (FTC) finalized a rule intended to prohibit most non-compete clauses for workers nationwide. Since then, the rule has been challenged in federal court and its enforceability has been the subject of ongoing litigation and shifting compliance strategies. By 2026, many Texas employers have adjusted by tightening restrictive covenants, emphasizing trade secret protection, and drafting “fallback” restrictions (like non-solicits and confidentiality obligations) that are more consistently enforceable.

What did not change is the Texas framework: Texas courts analyze non-competes primarily under the Texas Covenants Not to Compete Act (Texas Business & Commerce Code Chapter 15). Even in an uncertain federal environment, a Texas non-compete typically rises or falls based on (1) whether it is ancillary to an otherwise enforceable agreement and supported by proper consideration, and (2) whether it contains reasonable limitations as to time, geography, and scope of activity.

Practical takeaway: Draft as if you will have to defend the covenant in Texas state court under Chapter 15—and also as if a federal regulator or judge may scrutinize breadth and worker impact. The safest strategy is narrow, role-tied restrictions backed by demonstrable protectable interests.

Texas Enforceability Checklist (2026): The Five Requirements That Matter Most

1) Tie the Non-Compete to an “Otherwise Enforceable Agreement”

Under Texas law, a non-compete must be “ancillary to or part of” an otherwise enforceable agreement at the time the agreement is made. In practice, that usually means an employment agreement or offer letter that includes enforceable obligations on both sides.

Drafting tip: Put the restrictive covenant in the same document as (or explicitly incorporated into) confidentiality, IP assignment, and trade secret provisions. Make the cross-references explicit: “Employee acknowledges that the restrictions in Section X are ancillary to the confidentiality and trade secret obligations in Section Y.”

2) Provide Proper Consideration (and Document It)

Consideration is one of the most litigated Texas non-compete issues. Texas courts have recognized consideration where the employer provides access to confidential information, trade secrets, or specialized training, coupled with an enforceable promise to provide those things.

Best practices in 2026:

• Identify what the employee will receive. Examples include access to proprietary pricing, customer lists, roadmap information, source code, security architecture, or sales playbooks.

• Make the employer’s promise real, not illusory. Don’t say “may provide” confidential information; say “will provide” and connect it to the role.

• Use onboarding milestones. For example: “Within 30 days, Employee will receive access to Company CRM, pricing model, and customer renewal dashboard.” This helps later if you must prove consideration and protectable interest.

3) Limit Scope to Legitimate Business Interests

Texas law supports non-competes that protect legitimate interests—trade secrets, confidential information, goodwill, and customer relationships. A clause that looks like it exists to prevent ordinary competition is more vulnerable.

Drafting tip: Define the prohibited “competitive activities” by job function rather than by industry labels. “Providing SaaS sales leadership to a direct competitor” is better than “working in software.”

4) Keep Time, Geography, and Activity Restrictions Reasonable

Texas requires reasonable limitations as to:

• Time: Common ranges are 6–12 months for many roles; 12–24 months may be defensible for senior executives with deep strategic access.

• Geography: Should match the territory where the employee actually worked or had influence. For a remote employee, geography should be tethered to customer location, assigned territory, or specific accounts—not “the entire United States” by default.

• Scope of activity: Should match what the employee did (or could do with the employer’s protectable information). Overbroad bans on “any capacity” employment with a competitor are frequent targets.

5) Expect Reformation (“Blue-Penciling”)—But Don’t Rely on It

Texas allows courts to reform overbroad non-competes to make them reasonable, then enforce as reformed. That safety net is helpful, but not free: depending on the circumstances, overreach can delay enforcement and reduce recoverable damages.

Drafting tip: Draft a clause you can defend as reasonable on day one. Add a severability/reformation provision, but treat it as a backstop.

Step-by-Step: How to Draft an Enforceable Texas Non-Compete (with Examples)

Step 1: Define the Protectable Interests in Plain English

Include a short recital explaining why the restriction exists. Avoid boilerplate like “Company has confidential information” with no specifics.

Example (recital concept): “Employee will develop relationships with Company’s enterprise customers and will receive non-public information about pricing strategy, product roadmap, and renewal risk scoring. The restrictions below protect Company’s goodwill and trade secrets.”

Step 2: Draft Narrow “Competitive Activity” Language

Texas courts respond well to restrictions that target the risk: using the employer’s information to compete unfairly.

Better: “Employee may not provide sales engineering or enterprise account executive services for a Direct Competitor…”

Riskier: “Employee may not work for a competitor in any capacity, including administrative roles…”

Define “Direct Competitor.” Use a functional definition tied to products/services and market segment. If possible, limit to competitors selling substantially similar products to the same customer category.

Step 3: Choose a Defensible Geographic Limitation (Especially for Remote Work)

Geography is often where non-competes fail—particularly for modern teams that sell nationwide from Texas.

Options that are often more defensible than “anywhere”:

• Assigned territory: “counties or states in which Employee had sales responsibility during the last 12 months.”

• Account-based restriction: instead of geography, use a customer non-solicit for accounts the employee managed or learned about.

• Radius for location-based businesses: a reasonable radius around a clinic, franchise, or storefront.

Step 4: Pick a Time Period That Matches the Business Reality

The right duration depends on how long your confidential information stays valuable and how long customer goodwill persists.

Examples:

• Staffing / recruiting: 6–12 months often aligns with candidate pipelines and client cycles.

• B2B SaaS sales: 12 months may align with annual contracts; 18–24 months may be harder to justify unless the employee had strategic pricing/roadmap access.

• Medical/dental practice settings: reasonableness often turns on patient draw radius, specialty, and local market factors.

Step 5: Add Tailored Exceptions to Reduce Overbreadth

Overbreadth is not just a court problem—it is an FTC and reputational problem. Exceptions can help demonstrate reasonableness.

Common exceptions:

• Passive investment: Allow ownership of a small percentage of a public company competitor.

• Non-competitive roles: Permit work for a competitor in a role that does not overlap with restricted activities (e.g., “finance analyst not supporting sales, marketing, or product strategy”).

• Government/education roles: Sometimes appropriate depending on industry.

Non-Solicitation and Confidentiality: The Post-FTC “Core” Restrictions

Even where a non-compete is disputed, Texas employers often can protect the business through narrower covenants:

Customer Non-Solicitation

A well-drafted customer non-solicit focuses on customers the employee actually serviced, learned about, or had material contact with—typically during the last 12–24 months of employment.

Example scope concept: “customers or prospective customers with whom Employee had material contact or about whom Employee received Confidential Information.”

Employee/Recruiting Non-Solicitation

Employee raiding can rapidly damage a business. Keep the restriction targeted to employees the departing worker interacted with or supervised.

Confidentiality and Trade Secret Protection

In 2026, the most enforceable “restriction” is often a strong confidentiality clause paired with practical controls: least-privilege access, exit certifications, device return, and audit logs. These steps also strengthen requests for injunctive relief if you must sue.

Common Drafting Mistakes That Make Texas Non-Competes Easier to Defeat

Using a One-Size-Fits-All Template

A receptionist, a junior developer, and a VP of Sales should not have the same restriction. Texas reasonableness analysis is role-dependent. Tailor the activity restriction to what the person actually does.

Overly Broad Competitor Definitions

“Any business that provides technology solutions” can encompass nearly everyone. Courts dislike definitions that effectively remove the employee from the labor market.