How Does A Non-Compete Agreement In Texas Work? (2026)

What Is a Non-Compete Agreement?

A non-compete agreement is a contract prohibiting a former employee from working for a direct competitor or starting a competing business for a defined period of time after leaving a job.

Companies create employee non-compete agreements to protect their profits, business relationships and trade secrets.

Are These Agreements Enforceable Under Texas Law?

The Texas Free Enterprise and Antitrust Act prohibits most agreements that restrict a person’s ability to work in their chosen field. However, like some other states, it has created a narrow exception to allow some non-compete agreements.

A non-compete agreement in Texas may be valid if it meets the following criteria:

• It is part of a legal agreement that is otherwise enforceable.
• The employee has received something of value in return for their cooperation.
• The agreement is reasonable.

It’s important to note that while Texas law allows businesses to create contractor non-compete agreements, these agreements tend to be subject to even more legal scrutiny than agreements with employees.

Requirements for a Reasonable Restrictive Covenant

When determining whether a non-compete is reasonable, Texas courts usually look at the following:

• Time
• Geographic scope
• Specific activities to be restricted

Agreements that extend for long periods of time, cover a broad geographic area or don’t specify which activities are prohibited might not be enforceable.

What Makes a Non-Compete Unenforceable?

A non-compete agreement in Texas isn’t likely to be upheld if it’s overly broad or goes beyond simply protecting business interests. For example, if a company prohibits a former sales representative from poaching clients, that would probably be reasonable.

However, an agreement barring the sales rep from working in sales anywhere in Texas would likely be unenforceable.

Consequences of Violating the Agreement

When a non-compete is found to be legally enforceable, the consequences can be serious. If the court sides with the former employer, it might issue an injunction to stop the former employee from competing.

The former employer may also file a lawsuit to recover damages, and if it wins, the former employee may be responsible for legal fees. Violating a non-compete can lead to reputational damage that makes it much harder to find another job as well.

Are You Creating or Signing a Non-Compete Agreement in Texas?

Whether you’re an employer creating a non-compete agreement or an employee planning to sign one, it’s important to fully understand what Texas law says about these agreements to protect your rights.

ConsumerShield offers a range of educational materials and tools to get you started. Take a look at our legal document templates and guides today.