Are Non-Compete Agreements Enforceable in Texas in 2026?

Reviewing an agreement before signing. Photo: Karola G via Pexels.

If you signed a non-compete in Texas — or you are an employer who relies on them — you have probably heard the federal government tried to ban them. Here is the bottom line for 2026: that ban never took effect, and non-competes remain enforceable in Texas. But “enforceable” comes with real conditions, and a poorly drafted agreement can be worth nothing. Here is what actually governs non-competes in Texas today.

What Happened to the Federal Ban?

In April 2024, the Federal Trade Commission finalized a rule that would have banned most non-compete agreements across the country. The rule was scheduled to take effect on September 4, 2024, but a Texas federal court set it aside in Ryan, LLC v. FTC on August 20, 2024, concluding that the FTC lacked authority to promulgate the rule. The FTC appealed, and in September 2025 it took steps to dismiss its appeals and accede to vacatur of the rule. The FTC’s nationwide rule is not in effect and is not enforceable. On September 5, 2025 the Commission voted 3–1 to dismiss its appeals and accede to vacatur, and in February 2026 it removed the Non-Compete Rule from the Code of Federal Regulations — 16 CFR part 910 is now removed and reserved.

The practical result: there is no federal ban. State law remains the principal source governing whether an ordinary non-compete is enforceable, and it varies dramatically — from California, which generally prohibits employment non-competes, subject to statutory exceptions, to Texas, which enforces them within limits. Federal antitrust and unfair-competition law can still reach particular conduct: the vacatur removed the nationwide rule, not the FTC’s ability to act case by case.

The Texas Rule: Enforceable, Within Limits

Texas enforces non-competes that meet its statutory test. But “enforcement-friendly” is not “anything goes.” Under Texas Business and Commerce Code § 15.50, a non-compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made, and its limits on time, geographic area and scope of activity are reasonable and no greater than necessary to protect the employer’s goodwill or other business interest. In practice that breaks into three questions:

• It is ancillary to an otherwise enforceable agreement. The non-compete cannot stand alone — it must be tied to a legitimate underlying agreement, typically an employment relationship in which the employer provides something like confidential information or specialized training.
• The employer’s side of the bargain is real and connected to what the covenant protects. The Texas Supreme Court has held that consideration for a non-compete must be reasonably related to an interest worthy of protection, such as trade secrets, confidential information or goodwill, and that a covenant supported by a promise to provide confidential information becomes enforceable when the employer provides it.
• It is reasonable in time, geography, and scope. The restriction must be no broader than necessary to protect the employer’s goodwill or other business interest. A restriction covering an entire industry or a broad territory for years must still meet that test. If an otherwise enforceable covenant’s limits are unreasonable and impose a greater restraint than necessary, the court must reform them and enforce the covenant as reformed.

How Texas Courts Actually Treat Them

This is where many people are surprised. Even though Texas enforces non-competes, the statute gives courts specific tools when an agreement overreaches. A few realities worth knowing:

• Courts must reform an overbroad agreement. If the covenant is otherwise enforceable but its limits are broader than necessary, the court shall reform them and enforce the covenant as reformed. If the court reforms an otherwise enforceable covenant, it cannot award the employer damages for a breach before reformation; the employer’s relief for that breach is limited to injunctive relief. Where the underlying agreement’s primary purpose is personal services, the court may also award the employee reasonable defense costs, including attorney’s fees, if the employee proves that the employer knew at signing that the restrictions were unreasonable and nevertheless sought to enforce them beyond what was necessary.
• The promise has to be kept. Where the covenant rests on a promise of confidential information, it becomes enforceable only after the employer provides that information.

The takeaway for employers: an aggressive, overbroad non-compete can leave an employer worse off than a narrow one: a court will cut back an otherwise enforceable covenant, pre-reformation damages are off the table, and in some cases the employee can recover defense costs. For employees: a signed non-compete is not automatically valid — but it is also not automatically void. The specific terms and your situation control.

2025 Update: Special Rules for Health Care Non-Competes

Texas changed the rules for certain health care non-competes in 2025. Senate Bill 1318 took effect September 1, 2025. By its own terms it applies only to a covenant not to compete entered into or renewed on or after that date; a covenant made or renewed before then is governed by the law in effect when it was made.

The statute does not treat every clinician alike. It sets requirements for physicians in one provision and for a separately defined group of health care practitioners in another, and the two lists are not the same.

Four requirements shared across the covered professions

Physicians licensed by the Texas Medical Board are covered by Business and Commerce Code § 15.50. A separate provision, § 15.501, covers dentists licensed by the State Board of Dental Examiners, people licensed to engage in professional or vocational nursing, and licensed physician assistants. Under both provisions, a covered covenant must:

• expire no later than the one-year anniversary of the date the contract or employment terminated;
• limit the geographic area to no more than a five-mile radius from the location where the person primarily practiced before termination;
• provide for a buyout in an amount not greater than the person’s total annual salary and wages at the time of termination; and
• state its terms and conditions clearly and conspicuously in writing.

Additional protections that apply only to physicians

Physicians are covered by more than the four items above. Under § 15.50, a covenant relating to the practice of medicine must also preserve the physician’s access to a list of patients seen or treated within one year of termination, provide access to patient medical records on the patient’s authorization, and allow the physician to continue treating a specific patient through an acute illness after the employment ends.

Two further provisions are physician-specific. Under Section 15.50(d), a covenant relating to the practice of medicine is void and unenforceable against a Texas Medical Board–licensed physician who is involuntarily discharged without good cause, which the statute defines as a reasonable basis for discharge directly related to the physician’s conduct, job performance, or employment record. For purposes of the physician non-compete requirements in Section 15.50(b), managing or directing medical services in an administrative capacity for a medical practice or other health care provider is not the “practice of medicine.”

Those additional protections appear in § 15.50 and not in § 15.501. A dentist, nurse, or physician assistant is covered by the one-year, five-mile, buyout-cap and conspicuousness requirements, but not by the patient-list, medical-records, acute-illness, or discharge-without-good-cause provisions.

For a health care non-compete in Texas, the date matters as much as the terms. The 2025 rules reach agreements entered into or renewed on or after September 1, 2025; older agreements are measured against the prior law.

The California Contrast — Why Location Is Everything

Texas’s approach looks especially generous next to California, which bans employee non-competes almost entirely and has made it unlawful to include a non-compete clause in an employment contract or to require an employee to enter one, unless a statutory exception applies. For businesses operating across state lines — say, a company with employees in both Texas and California — this gap is a trap. The same agreement that is enforceable for your Texas staff may be not just void but actively unlawful for your California staff. Multi-state employers cannot rely on a single national template; the agreement has to match the law of each state where workers actually are.

What to Do Now

If you are a Texas employer: audit your existing agreements. Confirm they are tied to real consideration and narrowly tailored. Consider whether trade-secret protections and well-drafted non-solicitation clauses would serve you better than an aggressive non-compete a court might gut. Texas employers can also see our Austin startup attorney, Dallas startup attorney, and Houston startup attorney pages.

If you are an employee or considering a new role: do not assume your non-compete is either fully enforceable or completely worthless. Whether it holds up depends on the specific language, the consideration you received, and how reasonable the restrictions are. Before you sign — or before you leave to join a competitor — it is worth having the agreement reviewed by a Texas business attorney. Our contracts practice and employment law practice help both employers and employees navigate exactly these questions.

Frequently Asked Questions

Sources

• Tex. Bus. & Com. Code ch. 15
• 91 Fed. Reg. doc. 2026-02866 (FTC removes 16 CFR part 910)
• Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644 (Tex. 2006)
• Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011)
• Cal. Bus. & Prof. Code § 16600.1

This article is for general informational purposes only and is not legal advice, and may not reflect the most recent legal developments. Non-compete enforceability depends on the specific language of your agreement and your individual circumstances — consult a qualified Texas attorney before acting. Reading this article does not create an attorney-client relationship.