Texas Non-Compete Agreement Template

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Updated January 18, 2023

A Texas non-compete agreement prohibits an employee from engaging in the same business as the employer for a specific time period and geographical area. The employee must agree to a non-compete at the same time an employment contract is signed.

If already employed, an agreement must be supported by additional consideration such as a new position, pay, or increase in benefits.

Laws

Legally Enforceable?

Yes, a non-compete is enforceable under the following conditions:

  • Signed at the time of employment. Must be an ancillary to or part of an offer for employment;
  • Limitations. The non-compete is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest; and
  • Restrictions for physicians. If a physician signs a non-compete, the following rules apply:
    • Cannot deny access to a list of patients the physician has treated within the past year;
    • Must provide access to medical records of the physician’s patients (for a reasonable fee); and
    • That any list of patients or medical records is provided in a format agreeable by both the employer and physician.

Source: Sec. 15.50

Attorneys (prohibited)

An attorney cannot participate in any type of relationship or agreement that restricts their right to practice within the State.

Source: 5.06 (Restrictions on Right to Practice)

Continued Employment

Texas requires that for a non-compete to be valid, it “must be supported by consideration.” (Alex Sheshunoff Management Services, L.P. v. Johnson (2006))

Texas recognizes consideration as a “present exchange bargained for in return for a promise.” Therefore, no matter the training or knowledge gained in the past, it does not constitute sufficient consideration for continued employment. (CRC-Evans Pipeline International, Inc. v. Myers (1996))

At-Will Employees

If an at-will employee agrees to a non-compete, such covenant “must be supported by independent valuable consideration.”

Source: Alex Sheshunoff Management Services v. Johnson (2006)

Maximum Term

2 to 5 years has been deemed as “reasonable time” by the Court of Appeals.

Source: Gallagher Healthcare Ins. v. Vogelsang (2010)

Geographical Area

A non-compete cannot go beyond the geographical area where the employee worked or where the employer conducted its business.

Source: Cobb v. Caye Publishing Group (2010)

Blue Penciling

Texas statutes allow for an overbroad non-compete in relation to time, geographical area, or scope of activity to be reformed and made enforceable in accordance with State law. Such rulings will be made when a court deems the restraints to be more than necessary to protect the goodwill of the business.

Source: § 15.51(c)

Past Penalties ($)

3 cases had awarded punitive damages to employers when an employee had violated their non-compete: