How to Enforce a Non-Compete Agreement in Austin, Texas After the 2023 FTC Proposed Ban
Texas courts can enforce non-compete agreements if they meet the Texas Business & Commerce Code §15.50 requirements—even after the FTC’s 2023 proposed rule. In Austin, enforcement typically turns on whether the restriction is tied to an otherwise enforceable agreement and is reasonable in time, geography, and scope. This article explains how Austin employers can evaluate, pursue, and defend non-compete enforcement under current Texas law while tracking federal developments.
Where Things Stand in Austin: The FTC Proposed Ban vs. Current Texas Enforcement
The Federal Trade Commission (FTC) issued a proposed rule in 2023 that would broadly restrict non-compete clauses nationwide. A proposal, however, is not the same as a binding law, and Texas state courts continue to apply Texas restrictive covenant statutes and case law unless and until a controlling federal rule takes effect and survives legal challenges.
For Austin employers and in-house counsel, the practical takeaway is straightforward: Texas non-competes remain enforceable today if they satisfy the Texas Business & Commerce Code (TBCC), especially §15.50, and if you pursue enforcement with the right evidence and fast, disciplined litigation strategy.
Texas’s Enforceability Checklist (TBCC §15.50) in Plain English
Texas treats non-compete agreements as “covenants not to compete.” Under TBCC §15.50, the covenant is enforceable if it is:
1) Ancillary to or part of an otherwise enforceable agreement
In Texas, a non-compete generally must be tied to a valid agreement supported by consideration. Common examples include:
Employment agreements that provide access to confidential information, specialized training, or customer relationships;
Equity/bonus agreements that grant benefits conditioned on post-employment restrictions;
Sale-of-business agreements, where the seller agrees not to compete and the buyer is protecting goodwill.
In the Austin market, disputes often arise when an employer uses a “one-size-fits-all” non-compete without clearly documenting what the employee received in exchange (e.g., access to confidential information, training, proprietary systems, or customer lists).
2) Reasonable in time, geographic area, and scope of activity
Texas courts focus on whether restrictions go no further than necessary to protect legitimate business interests such as trade secrets, goodwill, and customer relationships.
Time: Many Texas cases consider 6–24 months more defensible than longer terms, though longer may be justified in some sale-of-business contexts.
Geography: “Austin, Travis County, and contiguous counties” or a defined sales territory can be more defensible than “anywhere in the United States,” unless the employee truly worked nationwide.
Scope: Prohibiting the employee from doing the same type of work they performed for the employer is more enforceable than banning them from an entire industry.
3) Designed to protect a legitimate interest
Austin businesses commonly cite protection of:
Trade secrets and confidential information (product roadmaps, pricing, source code, marketing plans);
Customer goodwill (relationships the employee cultivated on the employer’s dime);
Key employee relationships (team leaders, recruiters, and managers with influence over retention).
Step-by-Step: How to Enforce a Non-Compete in Austin, Texas
Enforcement usually hinges on speed, documentation, and choosing the right remedy. Here is a practical roadmap commonly used by Austin employers and counsel.
Step 1: Audit the agreement before threatening action
Before sending a demand letter or filing suit, confirm you can prove the key statutory elements:
Signed contract (and any amendments);
Clear “consideration” or benefits tied to the restriction (confidential info access, training, equity);
Definitions of “competing business,” “confidential information,” and restricted activities;
Duration and geography that match the employee’s actual role;
Attorney’s fees clause and injunctive relief language, if included.
If the covenant is arguably too broad, Texas courts may “reform” it in certain situations (often called “blue-penciling” in general conversation). But employers should not count on reformation as a strategy; it can impact what damages or fees you can recover and may weaken your leverage.
Step 2: Preserve evidence immediately (before it disappears)
In Austin’s tech-heavy economy, critical evidence is often digital and time-sensitive. Consider:
Device and account audit (company laptop, email, Slack/Teams, Git repositories, CRM activity);
Download logs and unusual access patterns prior to resignation;
Exit interview documentation confirming return of property and continuing obligations;
Customer communications suggesting solicitation;
Competitive intelligence (LinkedIn updates, new employer announcements, sales outreach).
Coordinate with IT and HR to avoid spoliation issues. If litigation is likely, counsel may implement a litigation hold and guide lawful collection methods.
Step 3: Send a targeted cease-and-desist letter (often the fastest off-ramp)
A well-constructed demand letter can resolve the issue without a lawsuit, especially when it:
Quotes the contract’s specific clauses and attaches the signed agreement;
States the factual basis (e.g., customer contact, competitive role, data download);
Demands concrete steps (stop competitive work, confirm deletion/return of data, certify compliance);
Notifies the new employer carefully, without defamation or tortious interference overreach;
Sets a short deadline given the risk of irreparable harm.
In Austin, many disputes involve the new employer offering reassignment or “carve-outs” (e.g., the employee works outside the restricted territory or avoids certain accounts). Your letter should leave room for a business solution while preserving your right to seek an injunction.
Step 4: Seek injunctive relief in Travis County when necessary
If the risk is immediate—customer poaching, misuse of trade secrets, or irreversible loss of goodwill—employers often pursue:
Temporary Restraining Order (TRO): fast, emergency relief to maintain the status quo;
Temporary Injunction: longer interim relief pending trial;
Permanent Injunction: final relief after adjudication or settlement.
Courts typically require evidence that money damages alone are inadequate and that harm is imminent. In practice, judges want a clear narrative: the employer’s protectable interest, the employee’s access, the threat or breach, and why the requested restriction is narrowly tailored.
Step 5: Consider related claims beyond the non-compete
Non-compete lawsuits in Austin often include additional causes of action that can strengthen injunction arguments, such as:
Misappropriation of trade secrets (under Texas trade secret law);
Breach of confidentiality agreements;
Non-solicitation violations (customers or employees);
Breach of fiduciary duty (for certain roles) or duty of loyalty;
Conversion or unauthorized retention of company property.
Even if the non-compete is disputed, a strong confidentiality/trade-secret claim can support injunctive relief and limit competitive damage.
What “Reasonable” Looks Like: Austin Examples
Reasonableness is fact-specific. Consider these simplified examples:
Example A: Likely more enforceable
An Austin-based B2B SaaS company restricts a senior account executive for 12 months from soliciting or servicing accounts the executive handled in the prior year within Central Texas. The executive had access to pricing models, renewal forecasts, and strategic plans.
Why it’s stronger: It is tied to customer goodwill and confidential information, and it targets the actual territory/accounts.
Example B: Higher risk of being overbroad
A startup requires every employee—including a junior support specialist—to agree they will not work for “any competitor” anywhere in the U.S. for 36 months, regardless of role.
Why it’s weaker: Geography and scope may exceed what’s needed, and the employee may not have a protectable level of confidential information or customer goodwill.
Example C: Sale-of-business context (often broader allowed)
A founder sells an Austin company and agrees not to compete in Texas for 3–5 years in the same niche.
Why it can be stronger: Courts often view protection of purchased goodwill as a powerful justification for broader restrictions, though the exact terms still matter.
Common Defenses Employees Raise—and How Employers Prepare
Expect a departing employee (and their new employer) to challenge enforcement using familiar defenses:
“It’s not supported by an otherwise enforceable agreement.”
Employers counter by documenting the exchange: access to confidential information, specialized training, equity grants, or other bargained-for benefits.
“The restriction is unreasonable.”
Employers should be ready to explain why the time/geography/scope matches the employee’s actual work and why narrower alternatives would not protect customer relationships or trade secrets.
“The employer breached first.”
Arguments may include unpaid commissions, unilateral pay changes, or failure to provide promised consideration. Clean payroll records, commission statements, and consistent policy enforcement help.
