Few developments unsettle a business owner more than learning that a top salesperson, senior manager, or technical lead has resigned and gone to work for a direct competitor. The concern is rarely the departure itself. It is the customer relationships, pricing strategies, and confidential information that may walk out the door with that employee. At Murray | Lobb Attorneys, we have represented Texas businesses for more than 37 years. In Texas, a non-compete agreement gives an employer the right to restrain a departing employee’s competitive activity, but only to the extent a court finds the restriction reasonable and supported by a legitimate business interest.
The Legal Standard for Non-Competes in Texas
Texas enforces non-compete agreements under the Covenants Not to Compete Act, found in Chapter 15 of the Texas Business and Commerce Code. Under Section 15.50, a covenant not to compete is enforceable if two conditions are met.
First, the covenant must be ancillary to or part of an otherwise enforceable agreement at the time the agreement is made. In practice, this means the employer must have given the employee something of value tied to the interest the covenant protects, such as access to confidential information, specialized training, or goodwill. The Supreme Court of Texas has held that this consideration can be provided after the agreement is signed, as long as the employer actually delivers it.
Second, the covenant must contain reasonable limitations as to time, geographic area, and scope of activity. Those limitations cannot impose a greater restraint than necessary to protect the employer’s goodwill or other legitimate business interest. A non-compete that simply prevents an employee from working in the industry, without protecting confidential information or customer goodwill, is unlikely to survive a court challenge.
What Courts Consider Reasonable
There is no fixed formula for reasonableness in Texas, but courts follow some consistent patterns.
- Duration. Restrictions of one to two years are commonly upheld. Longer periods face increasing scrutiny unless the business has unusually long sales cycles or customer relationships.
- Geography. The restricted territory should generally match the area where the employee actually worked or had customer contact. A nationwide restriction on a regional sales representative is likely overbroad.
- Scope of activity. The covenant should restrict only the type of work that threatens the employer’s interests. Barring an employee from any role at a competitor, including unrelated positions, invites a challenge.
Customer non-solicitation provisions limited to clients the employee actually dealt with are often viewed more favorably than broad non-competes, and many employers rely on both.
Reformation Instead of Invalidation
One feature that distinguishes Texas law is mandatory reformation. Under Section 15.51(c), if a court finds that a covenant contains unreasonable limitations, it must reform the covenant to the extent necessary to make it reasonable, rather than striking it entirely.
Reformation carries consequences. If a covenant must be reformed, the employer cannot recover monetary damages for the employee’s conduct before reformation and is limited to injunctive relief going forward. In addition, if the employee proves the employer knew the covenant was unreasonable and still sought to enforce it beyond what was necessary, the court may award the employee attorney’s fees and costs. These rules give employers a strong incentive to draft reasonable restrictions from the start.
Acting Quickly After the Employee Leaves
Timing is critical. A business that waits months to act may struggle to show the urgency required for injunctive relief. Once an employer learns that a former employee has joined a competitor, several steps should happen promptly:
- Review the agreement. Confirm what the employee signed, when, and what consideration was provided.
- Preserve evidence. Secure the employee’s devices, email accounts, and access logs before they are wiped or reissued. Downloads, file transfers, or forwarded emails shortly before resignation are often key evidence.
- Send a demand letter. A letter to the former employee, and often to the new employer, puts both on notice of the restrictions and can resolve the matter without litigation.
- Evaluate injunctive relief. If the threat is serious, the employer may seek a temporary restraining order and temporary injunction to stop the competitive activity while the case proceeds.
To obtain a temporary injunction, the employer generally must show a probable right to relief and a probable, imminent, and irreparable injury. Lost customer goodwill and the disclosure of confidential information are commonly recognized as irreparable harms in Texas courts.
Trade Secret Claims Can Strengthen the Case
Even where a non-compete is narrow or vulnerable, an employer may have additional claims. The Texas Uniform Trade Secrets Act protects confidential business information such as customer lists, pricing data, and technical processes when the employer has taken reasonable steps to keep that information secret. A departing employee who takes or uses such information may face an injunction and damages regardless of whether a non-compete exists. Claims for breach of fiduciary duty or tortious interference with contract against the new employer may also be available, depending on the facts. A civil litigation attorney can evaluate which claims apply and how to pursue them together.
Federal Developments
Employers may recall that the Federal Trade Commission adopted a rule in 2024 that would have banned most non-competes nationwide. A federal court in Texas set that rule aside before it took effect, and the FTC later abandoned its defense of the rule. Texas non-competes, therefore, remain governed by state law, although certain professions, including physicians, are subject to additional statutory requirements.
Talk With a Galveston County Civil Litigation Attorney
When a key employee leaves for a competitor, the decisions made in the first few weeks often determine whether the business can protect its customers and confidential information. An experienced civil litigation attorney can assess the strength of your agreement, gather the evidence needed to support injunctive relief, and pursue the claims that best protect your business. Murray | Lobb Attorneys serves clients throughout Harris, Galveston, Fort Bend, Montgomery, and Chambers Counties. Call 281-488-0630 or contact us to schedule a consultation with a Galveston County civil litigation attorney.