What a Texas non-compete agreement is for
Texas enforces non-competes, but on its own terms. The Covenants Not to Compete Act, sections 15.50 to 15.52 of the Business and Commerce Code, requires a covenant to be ancillary to an otherwise enforceable agreement and reasonable as to time, area and scope. The Texas Supreme Court has explained what that means in practice: the employer has to give the employee something, usually confidential information, specialized training or equity, that creates the interest the covenant protects, and it has to actually deliver it. A non-compete signed in exchange for nothing but a job, or one that bars an employee from an entire industry across the state, invites a court to rewrite it or refuse it.
This agreement is built around that test. It promises confidential information and training and records them in a schedule, defines confidential information carefully, and limits the non-compete to the services the employee actually provided in the area where they actually worked, with customer and employee non-solicitation covenants, reformation, tolling, a notice to new employers and remedies. Because S.B. 1318 changed the rules for health care practitioners from September 1, 2025, it includes an addendum for physicians, dentists, nurses and physician assistants.
When to use it
Use it when hiring or promoting an employee who will learn things a competitor would value: sales staff with customer relationships, account managers, engineers and technicians with proprietary methods, managers with pricing and strategy, and clinicians in medical, dental and nursing practices. Sign it at the start of employment or at a promotion, at the point the employee first receives the confidential information or equity.
It is not the right document for the sale of a business (where a different, broader covenant is usually justified), for independent contractors, or for low-wage roles with no access to confidential information, where a non-compete is unlikely to be enforced and may damage recruiting.
What's inside
The full list of sections and fields in this template, in the order they appear.
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Background and consideration
- Business described narrowly
- At-will employment
- Promise of Confidential Information
- Specialized training
- Equity or other consideration
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Confidential information
- Definition
- Use and disclosure limits
- Return and deletion
- Protected activity
- DTSA immunity notice
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Restrictive covenants
- Non-competition by role and area
- Restricted Period
- Customer non-solicitation
- Employee non-solicitation
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Enforcement
- Reasonableness
- Reformation under 15.51(c)
- Tolling
- Notice to new employers
- Injunctions and damages
- Fees
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General and signatures
- Survival
- Assignment
- Entire agreement
- Venue
- Severability
- Acknowledgment
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Schedule A
- Confidential information and training provided
- Dates
- Employee's acknowledgment
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Health Care Practitioner Addendum
- Clear and conspicuous terms
- One-year limit
- Five-mile radius
- Buyout capped at annual salary
- Patient care and records
- Discharge without good cause
- Administrative roles
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Enforcement Checklist
- 7 checks for the employer's file
Preview pages
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Page 1 -
Page 2 -
Page 3
How to complete the agreement
- Describe the Business narrowly. The products or services and the market, not the whole industry.
- State the consideration. Confirm the confidential information and training the employee will receive, and any equity.
- Set the Restricted Period. Twelve months is the most defensible starting point for most employees.
- Define the Restricted Area. Use the counties or radius where the employee actually worked or had customers.
- Keep the non-solicitation covenants. Limit them to customers and colleagues the employee actually dealt with.
- Fill in Schedule A. Record what is provided and when; update it as access grows.
- For health care practitioners, complete the Addendum. Set the buyout amount and the primary practice location.
- Sign before access. Have the employee sign before or at the time they first receive confidential information.
Example: a commercial HVAC sales manager
Fictional employer North Star Mechanical LLC of Fort Worth promotes Kyle Brennan to commercial sales manager on February 2, 2026, with a grant of 2,000 profits interest units.
Business: commercial HVAC installation and service in the Dallas-Fort Worth area. Consideration: access to the commercial accounts list and bid models on February 2, 2026; a three-day controls training course on March 10; the profits interest grant. Restricted Period: 12 months. Restricted Area: Tarrant, Dallas, Denton and Collin counties. Customer non-solicit: customers Kyle dealt with in his last 24 months.
If Kyle leaves on August 14, 2027 to sell for a competitor in Tarrant County, North Star can seek an injunction until August 14, 2028. If he takes a job selling residential systems in Austin, the covenant does not apply.
Texas rules to know
- Enforceability (section 15.50(a)). Ancillary to an otherwise enforceable agreement, and reasonable in time, area and scope of activity.
- Consideration. Confidential information, training or equity actually provided (Sheshunoff, 2006; Marsh, 2011).
- Reformation (section 15.51(c)). Overbroad covenants are reformed, but no damages for conduct before reformation, and possible fee-shifting against an employer that knowingly overreached.
- Exclusive remedies (section 15.52). The Act's procedures and remedies preempt other law.
- Health care practitioners (S.B. 1318, from September 1, 2025). One year, five miles, buyout capped at annual salary, clear and conspicuous terms; physicians discharged without good cause are released.
- Trade secrets. Texas Uniform Trade Secrets Act; the DTSA immunity notice preserves federal remedies.
Why Texas non-competes fail in court
Texas courts most often refuse or rewrite non-competes for the same reasons. The employer never actually gave the employee confidential information after the agreement was signed, so there was nothing for the covenant to be ancillary to. The restriction covered every business in the industry, or the whole state, for an employee who worked one territory. The agreement was signed months after the employee already had the customer list, with nothing new given in exchange. Or a 2025 physician agreement still used a three-year, twenty-mile restriction. The consideration section, Schedule A, narrow covenants and the health care addendum in this agreement are designed to avoid each one.
Frequently asked questions
Are non-compete agreements enforceable in Texas?
Yes, if they are ancillary to an otherwise enforceable agreement and reasonable as to time, geographic area and scope of activity (Business and Commerce Code section 15.50). In practice the employer must give the employee something that creates an interest worth protecting, such as confidential information, specialized training or equity. Continued at-will employment alone is not enough.
How long can a non-compete last in Texas?
The statute sets no fixed limit for most employees; courts usually uphold one to two years when the restriction matches the employee's role and territory. For physicians, dentists, nurses and physician assistants, agreements made or renewed since September 1, 2025 are limited to one year and five miles.
What happens if a Texas non-compete is too broad?
The court must reform it to make it reasonable and then enforce it (section 15.51(c)). But the employer cannot recover damages for conduct before the reformation, and if it knew the covenant was unreasonable and tried to enforce it anyway, it can be ordered to pay the employee's attorney's fees.
What did SB 1318 change for health care non-competes in Texas?
For agreements entered into or renewed on or after September 1, 2025, a non-compete for a physician, dentist, nurse or physician assistant must state its terms clearly and conspicuously, last no more than a year, cover no more than five miles from the primary practice location, and allow a buyout of no more than the practitioner's annual salary. A physician's non-compete is void if the physician is discharged without good cause.
Is the FTC non-compete ban in effect?
No. The Federal Trade Commission's 2024 rule banning most non-competes was set aside by a federal court in Texas before it took effect, so state law, including Texas's section 15.50, still governs non-competes.
