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.
Key takeaways
- • The FTC’s nationwide non-compete ban was struck down and is dead — state law governs.
- • Texas non-competes are enforceable if reasonable in time, geography, and scope — and properly supported.
- • Consideration matters — if the employer never provided real confidential info or training, courts often void the agreement.
- • Texas courts apply strict scrutiny — overly broad agreements get reformed or thrown out.
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. It never took effect. A Texas federal court struck it down in Ryan LLC v. FTC before its September 2024 effective date, finding the FTC lacked the authority to impose such a sweeping rule. The Fifth Circuit upheld that outcome, and in September 2025 the FTC formally abandoned its appeal — ending the effort entirely.
The practical result: there is no federal ban. Whether a non-compete is enforceable now depends almost entirely on state law, which varies dramatically — from California, which bans them outright, to Texas, which enforces them within limits. One important caveat: the FTC can still pursue individual enforcement actions against agreements it considers abusive, so "no nationwide ban" does not mean "anything goes."
The Texas Rule: Enforceable, Within Limits
Texas is an enforcement-friendly state — by some estimates, more than half of Texas employees are subject to a non-compete. But "enforcement-friendly" is not "anything goes." Under Texas Business and Commerce Code § 15.50, a non-compete is enforceable only if it meets three core requirements:
- 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.
- It is supported by consideration. The employer must actually give the employee something of value in exchange — commonly access to trade secrets, confidential information, or specialized training. If the employer never delivers that, Texas courts often void the agreement.
- It is reasonable in time, geography, and scope. The restriction must be no broader than necessary to protect the employer’s legitimate business interest. An agreement that bars someone from an entire industry, across the whole state, for years, is far more likely to be struck down than a narrow, well-tailored one.
Have a non-compete you need drafted, reviewed, or challenged? Whether you are an employer protecting your business or an employee weighing your options, the specific wording is everything.
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This is where many people are surprised. Even though Texas enforces non-competes, its courts apply strict scrutiny and regularly refuse to enforce agreements that overreach. A few realities worth knowing:
- Courts can reform an overbroad agreement. Rather than simply voiding a non-compete that goes too far, a Texas court may rewrite it to make it reasonable. Notably, if a court has to reform the agreement, the employer generally cannot recover its attorney’s fees — a real incentive for employers to draft narrowly in the first place.
- Lower-wage workers get extra skepticism. Courts are particularly wary of non-competes imposed on employees who had no access to genuinely sensitive information.
- No consideration, no enforcement. If the employer never actually provided the confidential information or training the agreement promised, the non-compete frequently fails.
The takeaway for employers: an aggressive, overbroad non-compete is often worse than a narrow one, because it invites a court to rewrite it and strips away your fee recovery. For employees: a signed non-compete is not automatically valid — but it is also not automatically void. The specific terms and your situation control.
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 even made it unlawful for an employer to ask a worker to sign one. 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.
If you are an employee or considering a new role: do not assume your non-compete is either ironclad or 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
Yes. Non-compete agreements remain legal and enforceable in Texas, governed by Texas Business and Commerce Code Section 15.50. The federal FTC rule that would have banned most non-competes nationwide was struck down by a Texas federal court in 2024, and the FTC abandoned its appeal in September 2025, so state law controls. A Texas non-compete is enforceable if it is ancillary to an otherwise enforceable agreement, supported by consideration, and reasonable in time, geographic area, and scope of activity.
No. The FTC finalized a rule in April 2024 that would have banned most non-competes nationwide, but a Texas federal court vacated it before its September 2024 effective date in Ryan LLC v. FTC, and the Fifth Circuit upheld that result. The FTC formally dropped its appeal in September 2025. The rule never took effect for any employer or employee. Enforceability now depends on state law.
Under Texas law, a non-compete must be ancillary to or part of an otherwise enforceable agreement (such as an employment agreement involving confidential information or specialized training), supported by valid consideration, and reasonable in its time period, geographic scope, and the activities it restricts. Texas courts apply strict scrutiny and will refuse to enforce, or will reform, agreements that are overly broad, and they are especially skeptical of non-competes imposed on lower-wage workers.
Texas courts apply strict scrutiny to non-competes. Rather than simply voiding an overly broad agreement, a Texas court may reform it — rewriting the time, geographic, or scope terms to make it reasonable. Importantly, if a court has to reform the agreement, the employer generally cannot recover its attorney’s fees. That gives employers a strong incentive to draft narrowly tailored agreements from the start rather than relying on aggressive, overbroad language.
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.