Employers often rely on restrictive covenants, such as non-competition and non-solicitation clauses, to protect their business interests. These agreements aim to prevent former employees from taking sensitive information, client relationships, or trade secrets to competitors. However, Texas law does not permit employers to impose such restrictions without limits. Courts carefully scrutinize whether these covenants are properly supported, narrowly tailored, and consistent with public policy.
The Legal Standard for Enforceability
Texas law requires that any non-competition covenant be “ancillary to or part of an otherwise enforceable agreement.” In practice, this means the restriction cannot stand on its own; it must be tied to an agreement that itself is legally valid, such as an employment contract that includes consideration in the form of access to trade secrets, specialized training, or confidential information.
Beyond this threshold requirement, a non-compete must also be reasonable in its duration, geographic scope, and scope of restricted activities. Courts balance the employer’s legitimate interests, such as protecting client goodwill or proprietary knowledge, against the employee’s right to work and the public’s interest in free competition. Restrictions that are too broad in time or territory are likely to be struck down. For example, a covenant that bars an employee from working in the same industry anywhere in the state for five years would almost certainly be unenforceable.
Non-solicitation agreements are subject to the same basic analysis. Texas courts permit employers to restrict former employees from soliciting clients or co-workers, but only if the restrictions are reasonable in scope and duration. A blanket prohibition on contacting “any customers” may fail if it sweeps far beyond those with whom the employee had actual dealings.
Special Rules for Healthcare Professionals
Recent legislative changes in Texas have tightened the rules for restrictive covenants in the healthcare industry. Senate Bill 1318, effective in 2025, imposes strict limits on non-compete agreements involving physicians and other healthcare providers. The statute caps the permissible duration at one year, restricts the geographic radius to five miles from the employee’s primary practice location, and requires employers to include a buy-out option that cannot exceed the equivalent of one year’s compensation.
These heightened requirements reflect a public policy concern: ensuring that patients maintain access to medical professionals without undue interference from contract restrictions. Healthcare employers must now draft their agreements with particular care, as any deviation from the statute’s requirements may render a covenant void.
Federal Developments and Their Limits
At the federal level, the Federal Trade Commission attempted to issue a sweeping ban on non-compete agreements in 2024. However, in August of that year, a Texas federal court issued a nationwide injunction blocking the FTC’s rule from taking effect. As a result, the enforceability of non-competes remains primarily a matter of state law in Texas. While federal regulatory developments signal broader skepticism of restrictive covenants, Texas courts and lawmakers continue to control the day-to-day enforceability of these provisions within the state.
Practical Implications for Employers and Employees
For employers, enforceability hinges on careful drafting. Non-competes and non-solicitation provisions must be tailored to protect specific, legitimate business interests without overreaching. Including clear geographic and temporal limits, ensuring that employees receive adequate consideration, and reviewing agreements for compliance with healthcare-specific rules are all critical steps.
For employees, it is important to understand that not all restrictive covenants will hold up in court. If a former employer seeks to enforce a non-compete that is overly broad or disconnected from any legitimate interest, employees may have grounds to challenge it. Healthcare workers now enjoy enhanced statutory protections that narrow the circumstances in which they can be bound by non-competition terms.
Conclusion
Ultimately, both employers and employees in Texas should approach restrictive covenants with caution. Employers must ensure compliance to avoid drafting unenforceable agreements, while employees should seek legal advice to understand the extent of their obligations and rights when presented with such provisions. Contact Romano Law today to ensure that your business is in compliance.
Contributions to this blog by Kennedy McKinney.
