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How to Enforce a Non-Compete Agreement in Texas After the FTC Noncompete Ban: Key Exceptions and Contract Drafting Tips

Texas employers can still enforce non-compete agreements under the Texas Covenants Not to Compete Act—even as the FTC’s 2024 noncompete rule faces major court challenges and limited, shifting effect. Businesses in Houston, Dallas–Fort Worth, Austin, San Antonio, and across Texas are reassessing restrictive covenants amid heightened scrutiny. This article explains Texas enforcement requirements, key exceptions and practical alternatives, and drafting tips to improve enforceability after the FTC developments.

Non-compete enforcement in Texas remains primarily a state-law question. While the Federal Trade Commission’s 2024 noncompete rule generated sweeping headlines, Texas employers and buyers of Texas businesses still look first to the Texas Covenants Not to Compete Act (Tex. Bus. & Com. Code §§ 15.50–15.52) and the related body of case law that governs what is—and is not—enforceable in Texas courts.

This article focuses on how Texas attorneys can evaluate and pursue enforcement of a non-compete after the FTC’s rulemaking efforts, what exceptions and carveouts matter most in practice, and how to draft (or revise) agreements to survive a real-world challenge.

1. The FTC “Noncompete Ban” and What It Means (and Doesn’t Mean) for Texas Cases

The FTC issued a final rule in 2024 aimed at banning most worker non-competes nationwide, with a limited carveout for certain senior executives and for non-competes tied to bona fide business sales. That rule has been the subject of significant litigation and has faced court orders limiting its effect. Because the legal landscape continues to evolve, Texas practitioners should treat FTC developments as an additional risk factor—not a substitute for Texas statutory analysis.

Practical takeaway: If you are seeking to enforce a non-compete in Texas, you still must plead and prove enforceability under Texas law. Separately, you should assess whether the agreement could be challenged under any applicable federal developments, and whether your enforcement strategy can be supported with narrower, less restrictive alternatives (e.g., non-solicitation and confidentiality).

2. The Texas Enforceability Checklist Under § 15.50

Texas does not treat non-competes as per se unenforceable. Instead, it enforces them when the statutory requirements are met. The core questions Texas courts examine are:

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

This is the threshold issue under Tex. Bus. & Com. Code § 15.50(a). In many employment settings, the “otherwise enforceable agreement” is a confidentiality, trade secret, or proprietary information agreement in which the employer promises to provide access to confidential information, specialized training, or goodwill, and the employee promises to protect it.

Drafting tip: Tie the non-compete to a clearly stated consideration: access to confidential information, customer relationships, proprietary processes, pricing, or specialized training. Avoid vague recital-only language; include an express promise to provide access and a defined scope of protected information.

B. Is the restriction reasonable in time, geographic area, and scope of activity?

Texas courts examine whether the restraint is no greater than necessary to protect legitimate business interests such as trade secrets, confidential information, and goodwill. “Reasonable” is fact-specific, but these guardrails help:

Time: Many Texas cases evaluate whether 6–24 months is reasonable depending on role and industry; longer terms are more vulnerable without strong justification.
Geography: A statewide restriction may be defensible for genuinely statewide roles; a narrow metro-area or territory tied to the employee’s actual market is more likely to hold.
Scope of activity: Prohibit only the competitive activities that threaten the protected interest. A blanket ban on “any work in the industry” invites reformation and fee exposure.

Example: A DFW sales executive covering North Texas may be subject to a North Texas territorial restriction tied to accounts worked in the past 12 months, while a back-office accountant generally should not be restrained from “working for a competitor” at all.

3. Key Exceptions and Carveouts That Still Matter After FTC Developments

Even with the FTC’s rulemaking efforts, several categories of restrictive covenants remain central in Texas business contracting. These are also areas where careful drafting can reduce risk.

A. Non-competes in the sale of a business

Texas courts are often more receptive to non-competes tied to the sale of a business or an ownership interest because the buyer is purchasing goodwill. Agreements should align the restriction with what was sold: customer relationships, territory, and product/service lines.

Drafting tip: Define the “Business” being sold and match the restriction to that definition. If the seller owned a niche HVAC service line in Houston, the covenant should not reach unrelated national construction markets.

B. “Senior executive” and high-level employee considerations

High-level executives frequently have broader access to strategy, pricing, customer relationships, and trade secrets. Those facts can support a broader restriction under Texas reasonableness standards. However, broader does not mean unlimited—Texas courts still expect tailoring.

Practice pointer: For executives, use role-specific findings: access to board-level strategy, M&A plans, product roadmaps, key account pricing, and enterprise compensation strategy. Connect each category to the restraint.

C. Non-solicitation, non-disclosure, and trade secret protections

Many disputes can be resolved more cleanly with:

Customer non-solicitation tied to accounts the employee serviced or learned about;
Employee non-solicitation focused on raiding key teams; and
Confidentiality/trade secret agreements with well-defined protected information.

These restrictions often appear less “work-preventing” than a full non-compete and may be easier to justify as necessary to protect goodwill and confidential information.

D. Garden leave and notice provisions (practical alternative)

Some businesses reduce risk by using “garden leave” concepts—requiring advance notice of resignation and paying the employee during a short restricted transition period. This can reduce the appearance of coercion and strengthen the narrative that the restraint is reasonable and tied to legitimate business needs.

4. Enforcement Tools in Texas: Demand Letters, TROs, Temporary Injunctions, and Damages

Texas non-compete enforcement typically moves quickly. If the former employee is actively soliciting customers or downloading data, waiting can be fatal to injunctive relief.

A. Start with evidence preservation

Before filing suit, counsel should consider:

Device and account access logs (email forwarding, downloads, CRM exports)
Exit interview notes and signed acknowledgments
Customer communications showing solicitation
Competitive intelligence showing overlap in products, territory, and timing

B. Demand letter strategy

A strong demand letter in Texas typically includes (1) the contractual provisions, (2) the factual breach, (3) a narrow cure proposal, and (4) litigation hold language. Overreaching letters can backfire—particularly if the covenant is likely to be reformed.

C. TRO and temporary injunction practice

Employers often seek a temporary restraining order (TRO) followed by a temporary injunction to preserve the status quo. Courts focus on:

Likelihood of success on the merits (enforceable covenant + breach)
Probable, imminent, and irreparable harm (loss of goodwill, trade secrets)
Balance of equities and public interest

Practical tip: Align requested relief with the agreement’s narrowest defensible interpretation. Asking for “industry-wide” restrictions where the contract and facts support “no solicitation of assigned accounts” can undermine credibility.

D. Damages, fee-shifting, and reformation (the “blue pencil” reality)

Texas law allows courts to reform overly broad covenants to make them reasonable, then enforce as reformed. But reformation is not a free pass. If an employer drafts an unreasonably broad covenant and sues, it may face limitations on recovering certain damages or attorney’s fees depending on how the court views the overbreadth and the timing of reformation.

Drafting tip: Treat reformation as a last resort, not the plan. Narrow, role-specific restrictions reduce the risk that the court rewrites the deal in a way that fails to protect the client’s true business interest.

5. Contract Drafting Tips to Improve Enforceability in Texas

A. Define the protectable interests with specificity

Use defined terms and concrete categories:

Trade secrets (as defined under Texas law)
Confidential information (pricing matrices, customer lists, margins, renewal dates)
Goodwill (key accounts, referral sources, vendor relationships)

Then explicitly connect the restriction to those interests: “Employee will have access to and develop relationships with…” followed by why the restraint is necessary.

B. Tailor geography to real markets

Better than “the State of Texas” is a tailored boundary such as:

The counties where the employee worked
A mileage radius from a territory hub (when facts support it)
Named customer locations or assigned sales territories

Example clause concept: “Restricted Territory means the counties in which Employee had material customer contact or sales responsibility during the final 12 months of employment.”