How to Enforce a Non-Compete Clause in Texas After the FTC Non-Compete Ban: Contract Drafting and Litigation Checklist
Texas courts can still enforce non-compete clauses under the Texas Covenants Not to Compete Act (Tex. Bus. & Com. Code § 15.50) if they are ancillary to an enforceable agreement and reasonable in time, scope, and geography. The FTC’s 2024 non-compete rule created national uncertainty, but Texas enforcement remains driven primarily by state statute and Texas case law unless and until federal developments clearly preempt. This article provides a Texas-focused drafting and litigation checklist for enforcing (or challenging) non-competes after the FTC ban headlines.
Where Texas Non-Compete Enforcement Stands After the FTC “Ban”
Texas enforcement of non-compete agreements is governed first and foremost by the Texas Covenants Not to Compete Act (“TCNCA”), primarily Tex. Bus. & Com. Code § 15.50. Under that statute, a non-compete is enforceable only if it is (1) ancillary to or part of an otherwise enforceable agreement and (2) contains reasonable limitations as to time, geographic area, and scope of activity that do not impose a greater restraint than necessary to protect the employer’s legitimate business interests.
The FTC’s 2024 rule and the resulting nationwide litigation have generated confusion for employers and employees. In practice, Texas attorneys should treat the FTC developments as a risk factor—and a reason to tighten drafting and litigation strategy—rather than an automatic “off switch” for Texas restrictive covenants. Unless there is a final, controlling federal outcome that clearly preempts state enforcement, Texas courts typically will continue applying Texas statutes and precedent to Texas contracts.
Texas Enforceability Requirements (What a Judge Will Actually Ask)
1) Is the covenant “ancillary to or part of” an otherwise enforceable agreement?
This is the gateway issue. In many Texas cases, the “otherwise enforceable agreement” is a contract where the employer provides something of value (often confidential information, specialized training, or access to customer relationships) and the employee makes binding promises (often confidentiality and non-disclosure). A common enforceability failure occurs when the non-compete is signed but the contract lacks a clear exchange tied to the restraint.
Drafting takeaway: Pair the non-compete with a robust confidentiality/IP/training package and make the linkage explicit. Courts are more comfortable enforcing a restraint when the employer can articulate the protectable interest the restraint is meant to safeguard.
2) Are time, geography, and scope reasonable?
Texas does not require the “tightest possible” restriction, but judges look for a sensible match between the restraint and the business interest. Overbroad restrictions invite reformation (see below) and can undermine injunction requests if the employer appears to be overreaching.
- Time: Often measured in months, not years. The appropriate period varies by role (e.g., outside sales vs. senior executive with strategic knowledge).
- Geography: Should correlate to the employee’s actual market footprint—where they worked or had influence—not an “all of Texas” or “nationwide” default unless justified.
- Scope of activity: Must target competitive activities that threaten the employer’s legitimate interests, not a blanket prohibition on working in an industry.
3) What legitimate business interests are being protected?
Texas courts commonly recognize interests in protecting trade secrets, confidential information, goodwill, and customer relationships. If the employer’s case is essentially “we don’t want competition,” enforcement becomes harder. If the case is “they took proprietary pricing, pipeline data, engineering methods, or customer contacts,” enforcement becomes materially stronger—especially when supported by device logs, document access records, and customer declarations.
The Post-FTC Rule Reality: Draft Like You May Need to Defend It
Regardless of how federal developments ultimately land, the headlines have changed the litigation posture. Expect more aggressive challenges, more public policy arguments, and more scrutiny of restrictive covenants. Texas employers are increasingly shifting toward a layered protection model:
- Confidentiality + trade secret protections (often the most enforceable and fastest route to injunctive relief)
- Non-solicitation (customers and employees)
- Non-disparagement and return-of-property
- Narrow, role-specific non-compete where truly necessary
This approach both mitigates FTC-related uncertainty and strengthens the “reasonableness” narrative: the employer is protecting specific interests, not blocking a livelihood.
Contract Drafting Checklist (Texas-Focused)
A. Build the “ancillary” foundation
Include an enforceable agreement that clearly provides consideration. Examples:
- Confidentiality and non-disclosure obligations tied to access to confidential data
- IP assignment and invention disclosure provisions for product/engineering roles
- Training commitments (documented, not vague)
- Equity grants or bonus plans with clear eligibility and conditions
Practice pointer: Put the confidentiality/trade secret language in the same agreement as the non-compete, or cross-reference precisely. Ambiguity invites an “ancillary” challenge.
B. Define “confidential information” with specificity
Define categories (pricing models, margin data, product roadmaps, customer lists, source code, vendor terms) and state that information may be confidential even if not marked, while still carving out public/independently developed information. Overbroad definitions can appear unreasonable; underbroad definitions weaken enforcement.
C. Calibrate time, geography, and scope to the job
Do: tie restrictions to the employee’s territory, accounts, vertical, or product line. Don’t: prohibit “any competitive activity anywhere” unless you can justify it (e.g., true national executive responsibilities).
Example (more defensible): “For 12 months, employee will not provide substantially similar sales services to a direct competitor for accounts employee managed or materially supported in the last 12 months, within the territory assigned.”
Example (riskier): “For 24 months, employee will not work for any competitor in the United States in any capacity.”
D. Add non-solicitation as a primary tool
Many disputes are really solicitation disputes. A narrowly drafted customer non-solicit and employee non-solicit can protect goodwill with less friction than a broad non-compete and may be easier to justify as “no greater restraint than necessary.”
E. Include venue, jurisdiction, and fee provisions thoughtfully
Texas forum selection, injunctive relief clauses, and fee-shifting provisions can materially affect leverage. Ensure clauses align with Texas law and the employer’s operational footprint (e.g., county of principal place of business). Also ensure arbitration provisions, if used, preserve access to temporary injunctive relief.
F. Plan for reformation (and avoid needing it)
Texas law allows courts to reform overbroad covenants to make them reasonable in certain circumstances. But reformation can delay or narrow early injunction relief and increase litigation costs. Drafting narrowly from the beginning improves the odds of fast, decisive relief.
Pre-Litigation Enforcement Checklist (Before You File)
1) Preserve evidence immediately
Courts decide temporary restraining orders (TROs) and temporary injunctions on a compressed timeline. Employers should preserve:
- Signed agreements (all versions, offer letters, amendments)
- Employee handbook acknowledgments (if relevant)
- Device logs, access logs, downloads, external drive use, email forwarding
- CRM exports, pipeline reports, customer contact changes
- Exit interview notes and return-of-property checklists
2) Identify the protectable interest and the story
A winning Texas enforcement case is a clear narrative: “This person had access to X, moved to Y competitor, and is now doing Z that threatens customers or trade secrets.” If the employer cannot identify what is at risk (beyond competition itself), judges are less likely to impose emergency restrictions.
3) Send a targeted demand letter (and consider the audience)
Texas demand letters should quote the covenant, identify breaches with dates, demand preservation, and request written assurances. Often, the letter is also aimed at the new employer, putting them on notice to reduce inducement or misuse of confidential information.
4) Consider a tailored “standstill” agreement
In some matters, a short standstill (e.g., no contact with named customers, no use of specified data, device inspection) resolves the emergency without full litigation. This is especially useful when the covenant may face FTC-related policy arguments or reasonableness disputes.
Litigation Checklist in Texas: TRO, Temporary Injunction, and Beyond
A. Choose the cause(s) of action strategically
Non-compete claims often perform best when paired with other well-supported claims, such as:
- Breach of contract (non-compete, non-solicit, confidentiality)
- Misappropriation of trade secrets under the Texas Uniform Trade Secrets Act (TUTSA)
- Tortious interference (in appropriate circumstances)
- Breach of fiduciary duty (for certain roles and conduct)
Even if a non-compete is narrowed or challenged, trade
