How to Draft an Enforceable Texas Non-Compete Agreement After the 2021 Covenants Not to Compete Act Amendments
Texas non-compete agreements are enforceable only if they comply with the Texas Covenants Not to Compete Act (Texas Bus. & Com. Code § 15.50) and are “ancillary to or part of” an otherwise enforceable agreement. The 2021 amendments and recent Texas Supreme Court guidance have sharpened how employers should draft, prove, and remedy violations. This article explains the post-2021 drafting checklist, common failure points, and practical sample clauses for enforceable Texas non-competes.
Texas has long enforced reasonable non-compete agreements, but only when drafters respect the statutory framework and Texas case law. The Texas Covenants Not to Compete Act (the “Act”)—primarily Texas Business & Commerce Code § 15.50—requires more than a signature and a broad restraint. A non-compete that is overbroad, unsupported by the right consideration, or not tied to a legitimate business interest can be narrowed by a court, but it can also cost time, leverage, and (in some cases) attorney’s fees.
Since the 2021 legislative changes to restrictive covenants and continued appellate scrutiny, Texas employers and business buyers should treat non-competes as precision instruments—not templates. Below is a practical, litigation-minded guide to drafting an enforceable Texas non-compete agreement in 2026 and beyond.
1. Start with the Statute: What Texas Requires for Enforceability
Under Texas Bus. & Com. Code § 15.50(a), a covenant not to compete is enforceable if it is:
(1) Ancillary to or part of an otherwise enforceable agreement, and
(2) Contains limitations as to time, geographic area, and scope of activity that are reasonable and do not impose a greater restraint than necessary to protect the employer’s goodwill or other business interest.
These elements drive nearly every courtroom fight:
- “Ancillary to or part of” forces you to tie the restriction to a real, enforceable exchange (not just “continued employment” language in the abstract).
- Reasonableness forces you to draft narrowly enough that a judge can see the connection to customer relationships, confidential information, and goodwill.
Key drafting takeaway
Draft the non-compete as a protection clause tied to a specific business interest (confidential information, trade secrets, specialized training, customer goodwill), not as a generalized prohibition on competition.
2. Make the Non-Compete “Ancillary to” an Otherwise Enforceable Agreement
Texas courts focus on whether the employer provided (or promised to provide) something that gives rise to the interest the non-compete protects. Classic examples include:
- Confidentiality/trade secret access (with a real promise to provide confidential information and a real need to protect it)
- Specialized training that is valuable and not merely orientation
- Stock/equity grants tied to protecting goodwill or proprietary information
- Sale-of-business consideration (purchase price allocated to goodwill)
Practically, the cleanest path is to pair the non-compete with a robust confidentiality and IP agreement that clearly states the employer will provide access to confidential information and that the restriction is designed to protect it.
Example: Ancillary language that helps in court
Good: “Employee will receive access to Company Confidential Information and customer relationships. The parties agree the restrictions in Section X are reasonably necessary to protect Company’s Confidential Information and goodwill.”
Risky: “In consideration of employment, Employee agrees not to compete…” (especially if no separate enforceable promises exist)
3. Define the Protectable Interests (and Match the Restriction to Them)
Texas recognizes protectable interests like:
- Trade secrets and confidential information (pricing, margins, customer lists, technical data, internal processes)
- Goodwill (customer relationships, referral sources, brand-based relationships)
- Specialized training (when it is unique, valuable, and not widely available)
Drafting mistake: claiming you need a two-year statewide ban to protect “confidential information” while the employee served one county and had no pricing authority. Courts look for fit.
Drafting tip: specify categories
Instead of “Confidential Information includes anything Company considers confidential,” use a non-exhaustive but concrete list (e.g., “customer pricing and margin data; sales pipelines; product roadmaps; vendor rebate terms; source code; security procedures”). This also supports injunctive relief by making misappropriation easier to prove.
4. Draft Reasonable Limits: Time, Geography, and Scope
Texas requires reasonable limits in three dimensions. There is no one-size-fits-all standard, but judges regularly compare your restraint to the employee’s actual role.
Time
Common enforceable ranges are 6–24 months depending on role, industry, and the shelf-life of confidential information. Shorter is easier to enforce; longer should be justified (e.g., long sales cycles, lengthy customer contracts, high-level executives).
Geography
Geographic limits should track where the employee actually worked, sold, managed, or influenced customers. Options include:
- Territory-based (counties, metro areas, or states where the employee did business)
- Customer-based (restriction tied to specific customers or prospects the employee serviced)
- Facility radius (e.g., within 25 miles of a facility—more common for local services)
Customer-based restrictions are often more defensible than broad geographic bans, especially for remote or statewide roles.
Scope of activity
Limit the restriction to the work the employee actually performed or had strategic influence over. “Any capacity” prohibitions (e.g., barring an engineer from being a receptionist for a competitor) invite reformation and fee exposure.
Example: a narrower, stronger scope
“Employee shall not provide sales or account management services for a Competing Business to customers Employee serviced or solicited on behalf of Company during the last 12 months of employment.”
5. Use a Definition of “Competing Business” That Isn’t Overbroad
Overbroad competitor definitions are a common reason courts narrow covenants. Define “Competing Business” by reference to specific lines of business, product categories, or services—and, if possible, a market segment.
Overbroad: “Any business that competes directly or indirectly with Company.”
Better: “Any business that provides commercial HVAC maintenance services to industrial facilities within the Restricted Area.”
6. Combine Non-Compete with Non-Solicitation and Confidentiality (Strategically)
In practice, many Texas cases are won or lost on non-solicitation and confidentiality provisions. A well-built restrictive covenant “stack” can reduce the need for an aggressive non-compete:
- Non-solicitation of customers (often easier to justify and enforce)
- Non-solicitation of employees (helps prevent team lift-outs)
- Confidentiality and trade secret protections (essential for injunctions)
If your true concern is customer poaching, a focused non-solicit may withstand scrutiny better than a wide non-compete—while still accomplishing the business goal.
7. Address Remedies: Injunctions, Fees, and Reformation
Texas allows courts to reform (narrow) overbroad covenants to make them reasonable and enforceable. But drafting for reformation is not a license to be aggressive.
Reformation and attorney’s fees
Under § 15.51, if a court reforms the covenant, the employer’s ability to recover damages/fees for pre-reformation breach can be limited. The practical point: the broader the covenant, the more likely you trade speed and leverage for a judicial rewrite.
Injunctive relief language
Include:
- Express acknowledgement that breach causes irreparable harm
- Right to temporary restraining order and temporary/permanent injunction
- Tolling provision (extend restriction by time in breach)
Courts still require proof, but these clauses help frame the equities and urgency.
8. Draft with the 2021 Amendments in Mind (and Current Litigation Realities)
The 2021 legislative activity around restrictive covenants reinforced a core trend: Texas courts increasingly focus on precision—clear protectable interests, narrow tailoring, and credible evidence of need. From a drafting standpoint, that means:
- Document the legitimate interest: why this employee has access to key information or goodwill.
- Align the restriction with reality: territory, customers, role, and duration should match the employee’s footprint.
- Avoid “gotcha” drafting: overly punitive liquidated damages, “any capacity” bans, and sweeping competitor definitions tend to backfire.
If you anticipate needing an injunction, draft as though you will be explaining the restraint to a judge in the first 10 minutes of an emergency hearing—because you might.
9. Special Case: Non-Competes in Sale-of-Business Transactions
Non-competes tied to the sale of a business are typically easier to enforce than employment non-competes because the buyer is purchasing goodwill. Still, reasonableness matters
