How to Draft an Enforceable Non-Compete Agreement in Texas After the FTC Non-Compete Rule (2026 Update)
Texas non-competes remain enforceable in 2026, but only if they satisfy Tex. Bus. & Com. Code § 15.50’s “ancillary to” and “reasonable” requirements. The FTC’s attempted nationwide non-compete ban has not displaced Texas statutes, yet it has changed how courts, employers, and employees scrutinize restrictive covenants. This update explains how to draft (and revise) enforceable Texas non-competes after the FTC rulemaking fallout, with drafting checklists, clauses, and pitfalls.
Where Texas Non-Compete Law Stands in 2026 (and Why the FTC Rule Still Matters)
Texas enforces non-compete agreements under a specific statute: the Texas Covenants Not to Compete Act, primarily Tex. Bus. & Com. Code § 15.50. Whatever the federal policy debate, a Texas non-compete is generally enforceable 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, geographical area, and scope of activity that do not impose a greater restraint than necessary to protect the employer’s goodwill or other business interests.
The FTC’s non-compete rulemaking effort—regardless of where federal litigation ends up—has had two practical effects in Texas: (1) employees and competitors increasingly challenge non-competes as overbroad and anti-competitive, and (2) many companies have shifted to trade-secret protection, non-solicitation, and confidentiality-first drafting. The best 2026 drafting approach is to assume your agreement will be reviewed skeptically and to make enforceability obvious from the first page.
Texas’s Two Gatekeepers: “Ancillary to” + “Reasonable”
1) “Ancillary to or part of an otherwise enforceable agreement”
A Texas non-compete cannot stand alone as a naked restraint. It must be tied to an enforceable contract in which the employer provides something of value that justifies the restraint—most commonly confidential information/trade secrets access, specialized training, or other protectable business interests.
Drafting rule: Put the consideration in writing, specifically and contemporaneously. Do not rely on vague statements like “Employee may learn confidential information.” Instead, specify what the company is providing and why the restriction is necessary to protect it.
Example (strong): “Company will provide Employee access to proprietary pricing models, customer purchasing history, and product roadmaps, and will provide training on Company’s sales process. Employee acknowledges these items confer a competitive advantage and are confidential.”
Example (weak): “Employee agrees not to compete in exchange for employment.” (Employment alone can be risky if not coupled with real confidentiality/training obligations.)
2) “Reasonable” limitations (time, geography, scope)
Even if the agreement is “ancillary,” Texas requires the restraint to be narrowly tailored. In 2026, courts remain more willing to enforce targeted restrictions and more willing to reform (“blue-pencil”) overbroad language—yet overreach can still cost you leverage, speed, and attorneys’ fees.
Drafting rule: Start with the business interest you are protecting (trade secrets, customer goodwill, key accounts, specialized training) and tailor restrictions to that interest. If you cannot explain why each limit is necessary, a judge may not buy it either.
Step-by-Step: Drafting an Enforceable Texas Non-Compete
Step 1: Identify the protectable business interest (and say it plainly)
Texas recognizes protection of goodwill, trade secrets, and other legitimate business interests. Your agreement should explicitly link the restriction to those interests. This is especially important after the FTC policy debate, because challengers often frame non-competes as mere labor market restraints.
Practical tip: Add a short “Purpose” clause: “The purpose of this covenant is to protect Company’s goodwill with identified customers and confidential information described in Section X.” Purpose statements do not replace statutory requirements, but they help a court understand your tailoring.
Step 2: Build the “otherwise enforceable agreement” foundation
A common enforcement failure is treating the non-compete as an HR template instead of a contract supported by real consideration. To strengthen enforceability:
Include:
- Confidentiality obligations (what information is confidential, how it may be used, and return/destruction obligations).
- Access grant (the company will provide access to specified confidential categories).
- Training clause (if applicable, describe specialized training; avoid claiming “specialized” training when it is routine onboarding).
- Invention/IP assignment (often paired in executive/engineering roles; helps show protectable interests).
Drafting pitfall: Overstating confidentiality. If you label everything confidential—including public marketing materials—courts can view the agreement as a pretext for restraint. Define confidential information carefully and exclude publicly available information and employee’s pre-existing knowledge.
Step 3: Draft a narrowly tailored restriction (scope of activities)
Texas requires a reasonable “scope of activity.” The safest approach is to restrict the employee from performing the same or substantially similar services they performed for your company, but only for competitors in a defined competitive set.
Better than “no competition”: “Employee will not provide [sales management] services to a Competitor with respect to [Product Line A] within [Defined Territory] for 12 months.”
Avoid: “Employee may not work for any business similar to Company in any capacity.” That kind of “any capacity” restriction is a frequent overbreadth target, especially for employees who could work in non-competitive roles (e.g., HR, finance).
Step 4: Choose a defensible time period
Texas law does not set a single maximum duration, but reasonableness is the benchmark. In practice, many enforceable agreements use 6–24 months depending on role, sales cycle, and the half-life of the protected information.
Drafting tip: Tie duration to business realities. For example, if your sales cycle is 9–12 months and account relationships renew annually, 12 months is easier to defend than 36 months. For technical roles, consider how quickly product roadmaps change.
Step 5: Define geography intelligently (or use customer-based limits)
Geographic limitations are a classic litigation battleground. In a remote-work economy, geography should reflect where the employee actually worked or where customers are located.
Three workable approaches:
- Territory actually served: “Counties/metros where Employee had material customer contact in the last 12 months.”
- Customer-based restriction (often strongest): Restrict solicitation/service for customers the employee dealt with, rather than drawing a giant radius.
- Hybrid: A modest geographic area plus a customer list attachment.
Risky approach: “Anywhere in Texas/United States” for a mid-level employee with a local book of business. If you need a broad geography (e.g., national enterprise sales), justify it with the employee’s actual territory and access to national strategy.
Step 6: Add a severability and reformation (“blue-pencil”) framework
Texas courts can reform overbroad restrictions in certain circumstances. Still, do not draft aggressively counting on a judge to fix it; reformation can delay injunctive relief and affect damages/fee leverage.
Include: severability, reformation, and express intent that restrictions are to be enforced to the maximum extent permitted by Texas law. Also specify Texas venue and governing law (when appropriate) and ensure the forum selection is consistent with the employee’s circumstances and any other applicable law.
Step 7: Pair the non-compete with non-solicitation and confidentiality (often the real workhorses)
Post-FTC, many Texas employers rely more heavily on non-solicitation and confidentiality because they are often easier to justify and enforce than a full non-compete.
Customer non-solicit: Focus on customers/prospects the employee had material contact with or obtained confidential information about.
Employee/raiding non-solicit: Protects teams and prevents coordinated departures.
Confidentiality + trade-secret protections: Include practical controls—return of devices, deletion attestations, cloud account termination, and forensic inspection rights where appropriate.
Key drafting note: Non-solicitation terms can also be challenged as de facto non-competes if drafted too broadly (e.g., barring any contact with all customers nationwide). Tailor them the same way you tailor the non-compete.
Practical Clauses That Improve Enforceability (with Examples)
Define “Competitor” with objective criteria
Example: “Competitor means any entity that derives more than 25% of its revenue from [specified product/service] offered in competition with Company’s [specified product/service] in the Restricted Territory.”
This avoids disputes over whether a diversified company is a “competitor” and reduces overbreadth.
Use “material contact” and “confidential information” triggers
Example: “Restricted Customers are those customers or actively pursued prospective customers with whom Employee had material business contact, or about whom Employee received Confidential Information, during the 12 months preceding separation.”
Consider a garden leave or paid non-compete for key executives
Texas does not require payment during the restriction to enforce a non-compete, but paid restrictions can make reasonableness easier to defend and can reduce jur
