Non-Compete Enforceability: In Texas And Beyond - Contract of Employment - United States - Mondaq
Non-compete agreements have been under fire for years, and it's unlikely 2025 will be any different. While non-competes are currently governed at the state level; the Federal Trade Commission's (FTC) nationwide ban...
Non-compete agreements have been under fire for years, and it's unlikely 2025 will be any different. While non-competes are currently governed at the state level; the Federal Trade Commission's (FTC) nationwide ban on most non-competes was supposed to take effect in September 2024. Instead, a Texas federal court blocked the rule, arguing the FTC lacks enforcement authority. The appeal is still pending, and the new Chair, Andrew Ferguson, may lead the FTC in a different direction.
What does that mean for Texas businesses?
Texas has long enforced non-competes when they meet certain legal requirements. Under the Texas Covenants Not to Compete Act , a non-compete agreement ("NCA") is enforceable if it:
- is supported by valid consideration; and
- is part of an otherwise enforceable agreement;
- includes reasonable restrictions on geographic area, time, and scope of activities.
Texas courts tend to favor reformation over invalidation and judges often narrow the NCA rather than throw it out completely.
What is Considered Too Broad?
Several Texas cases have shaped court's views on NCAs:
- In 2006 the Texas Supreme Court addressed concerns about at-will employment and whether an employer's promise was binding enough to support enforcement of a noncompete. The Court held...
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