For a few months in 2024, employers across Texas thought non-competes were finished. The FTC’s nationwide ban was scheduled to take effect on September 4, 2024, and most companies were preparing to send notices to employees that their existing non-competes would no longer be enforceable. On August 20, 2024, Judge Ada Brown of the Northern District of Texas set aside the rule in Ryan LLC v. Federal Trade Commission, finding that the FTC had exceeded its statutory authority. The FTC initially appealed, then voluntarily dismissed the appeal on September 5, 2025, leaving the Texas common-law and statutory framework that has governed non-competes for decades quietly back in control. A Dallas business law attorney drafting or reviewing restrictive covenants in 2026 needs to understand the framework Texas actually applies, which is more permissive than California or New York and more restrictive than many employers assume.
Here is what Texas Business and Commerce Code § 15.50 actually requires, and where the drafting decisions sit.
The Two-Part Test Under § 15.50
Texas non-compete law is governed by Business and Commerce Code §§ 15.50 through 15.52. The statute makes a covenant not to compete enforceable if two requirements are satisfied.
The covenant must be ancillary to or part of an otherwise enforceable agreement at the time the agreement is made. The Texas Supreme Court’s 1994 decision in Light v. Centel Cellular Co. of Texas originally read this requirement strictly, requiring that the consideration given by the employer “give rise to” the employer’s interest in restraining competition. The Court relaxed that test substantially in Marsh USA Inc. v. Cook (2011), holding that the covenant only needs to be “supplementary” to or “part of” the otherwise enforceable agreement, with no requirement that the consideration give rise to the protectable interest itself.
The covenant must contain limitations as to time, geographic area, and scope of activity that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.
Both elements have to be satisfied. A covenant that meets one but not the other is not enforceable as drafted.
What Counts as Adequate Consideration
The “otherwise enforceable agreement” requirement is where most Texas non-compete enforceability analyses turn. Courts have recognized several forms of consideration as adequate.
Access to confidential information or trade secrets is the most common path. An employer that gives an employee access to customer lists, pricing structures, proprietary processes, or strategic plans creates a protectable interest, and a non-compete tied to that access is generally enforceable.
Specialized training paid for by the employer can also support a non-compete, particularly when the training is industry-specific and developed at significant cost.
Stock options, restricted stock units, and similar equity grants now satisfy the requirement under Marsh USA. The grant does not need to give rise to the protectable interest directly. It is enough that the grant supplements an otherwise enforceable agreement that protects the employer’s goodwill.
What does not work is continued at-will employment alone. Texas courts have consistently held that the promise to keep an at-will employee employed, without more, is illusory consideration that cannot support a non-compete. Employers using offer letters that contain non-competes paired only with at-will employment are signing unenforceable agreements.
Reasonableness in Time, Geography, and Scope
The reasonableness analysis is fact-specific, and Texas courts have a long track record of enforcing or reforming covenants based on the specific facts.
Time periods of one to two years are commonly enforced for typical employees. Longer periods, three to five years, are generally limited to senior executives, owner-employees in connection with a sale of business, or employees with extensive customer relationships built at the employer’s expense.
Geographic scope is usually calibrated to where the employee actually worked or where the employer actually does business. A nationwide non-compete for a regional sales representative typically fails. A Texas-wide non-compete for a senior executive of a Texas company may hold up.
Scope of activity needs to track what the employee actually did. A non-compete that bars a former software engineer from working in any role at any technology company sweeps too broadly. The same engineer barred from developing competing products in the specific technical area they worked in is far more likely to be enforced.
The blue-pencil doctrine works differently in Texas than in many states. Section 15.51(c) requires Texas courts to reform overbroad non-competes to make them reasonable and enforceable, rather than voiding them entirely. The reform is mandatory rather than discretionary, which means an overbroad clause does not automatically free the employee.
Healthcare Non-Competes and the 2025 Amendments
Texas treats non-competes in healthcare differently. Section 15.50(b) imposes specific requirements on physician non-competes, including access to patient lists, access to medical records, a buy-out provision at a reasonable price, and notice obligations.
Senate Bill 1318, the “Texas Covenants Not to Compete Act,” took effect September 1, 2025, expanding the healthcare framework. Geographic restrictions for healthcare practitioners are limited to a five-mile radius from the employee’s primary practice location. Coverage was extended beyond physicians to include dentists and nurses. Patient access protections were strengthened.
For Dallas healthcare employers, the practical effect is that non-competes drafted under the previous physician-specific framework need to be revised to comply with the broader 2025 framework, and non-competes for non-physician healthcare workers that did not exist before are now allowed in narrower form.
What a Dallas Business Law Attorney Watches in 2026
The post-Ryan LLC landscape is more stable than it was in 2024, but several developments continue to shape non-compete enforceability in Texas.
The FTC’s September 2025 dismissal of its appeal removed the immediate threat of a federal ban, but the agency has signaled it will pursue case-by-case enforcement actions against non-competes the FTC views as unfair competition. That enforcement risk is real even where the underlying agreement is enforceable under Texas law.
The Texas Citizens Participation Act has been invoked in non-compete enforcement actions, with mixed results. Defendants targeted under non-competes have used the TCPA to seek dismissal at an early stage and recover attorney’s fees, which changes how plaintiffs should evaluate enforcement strategy.
Texas courts continue to require careful drafting. Form non-competes pulled from out-of-state templates often fail Texas standards because they treat the “ancillary” requirement loosely or use reasonableness language calibrated to other states’ tests.
Sale-of-business non-competes operate under a different and generally more permissive standard. Covenants given by a seller in connection with the sale of a business have historically been enforced in Texas with longer durations and broader scope than employment non-competes, and the Marsh USA relaxation does not change that distinction.
Practical Steps for Texas Employers
A few specific moves position Texas employers well under the current framework.
Audit existing non-competes against the Marsh USA “ancillary” analysis and the reasonableness factors. Covenants paired only with at-will employment are vulnerable.
Calibrate duration, geography, and scope to what is actually necessary. Texas courts will reform overbroad covenants, but reformation usually narrows the protection significantly.
Layer non-disclosure agreements and trade secret protections separately from non-competes. The Texas Uniform Trade Secrets Act (Civil Practice and Remedies Code Chapter 134A) and well-drafted NDAs reach many of the same protective interests without the § 15.50 complications.
Update healthcare non-competes for the September 2025 SB 1318 framework, including the five-mile geographic limit and expanded coverage of dentists and nurses.
For sale-of-business non-competes, draft them with appropriate goodwill recitations and consideration tied to the transaction value rather than to ordinary employment.
When to Bring in a Dallas Business Law Attorney
Texas non-compete law is more permissive than many states, but the drafting choices matter substantially. A Dallas business law attorney auditing existing restrictive covenants, drafting new ones, or evaluating whether to enforce a covenant against a departing employee can navigate the Marsh USA framework, the reasonableness analysis, and the 2025 healthcare amendments in a way that holds up under judicial scrutiny.
The Mundaca Law Firm advises Dallas employers and businesses on restrictive covenants, employment compliance, and the broader employment law issues that surface alongside them. If your company’s non-compete and non-solicitation agreements have not been reviewed against the post-Ryan LLC landscape and the 2025 healthcare framework, a compliance review now is significantly more efficient than litigating an unenforceable covenant later.
