The Federal Trade Commission (FTC) estimates that one in five U.S. employees is subject to a non-compete. In Texas, that number is more than doubled: above 50%, according to Economic Policy Institute (EPI) research. Non-competes occupy something of a regulatory gray area. Their enforceability varies between administrations, states and professions, and the rules are not always clear to employees or employers.

As of 2026, cases are largely assessed on an individual basis. This means that over half of Texas employees could find themselves navigating non-compete agreements that may or may not be enforceable.

What Is a Non-Compete?

A non-compete is a condition of employment that restricts an employee from working for a competitor and/or becoming a competitor after employment ends. The extent of the restriction varies. Often, non-competes are limited in scope, applying only to a prescribed:

• Business activity
• Professional practice
• Geographic Area
• Duration

For example, a large-animal veterinary practice may issue a non-compete that restricts an employee from: Practicing equine medicine within 10 miles of Austin, Texas for two years after the end of employment.

Non-compete agreements, by design, hamper competition by preventing employees from either working for a competing business or starting a competing business of their own. Because of this, non-competes have repeatedly come under scrutiny by the Federal Trade Commission (FTC), which enforces regulations in order to prevent unfair competition methods and other unfair business practices (15 U.S.C. 45(a)).

Note that the Texas State Business and Commerce Code uses the term “covenant(s) not to compete,” but this is synonymous with “non-compete.”

Are Non-Compete Agreements Banned in the U.S.?

No, non-competes have not been banned. In 2024, the FTC issued a rule which would have effectively banned most non-competes beginning September 4, 2024. The rule provided some exceptions: non-compete clauses attached to a business sale were permitted, for instance. A Federal District Court (N.D. Texas) set aside the FTC’s Non-Compete Rule, holding it as unlawful (Ryan LLC v. Federal Trade Commission). Following changes in administration, the FTC abandoned its appeal efforts on September 5, 2025, acceding to the courts’ vacaturs of the Non-Compete Rule.

Does the FTC Still Regulate Non-Competes?

Yes, the FTC does still enforce antitrust laws and restrict unfair business practices, including bringing enforcement actions against businesses that use unreasonable, overly restrictive non-competes. Non-compete agreements remain legal on a national level, but that does not mean every non-compete is enforceable.

The current FTC’s position is that it is not within their authority to issue nationwide regulations restricting non-competes. Such an action must be undertaken by Congress. Instead, the FTC has adopted a case-by-case approach, applying its enforcement principles to any given situation to assess an agreement’s reasonableness and weigh any benefits to the employer against the harms to employees and the public.

Individual states regulate non-competes to varying extents. In all states, however, the federal standard serves as a mandatory, minimum baseline.

What is the Difference Between a Non-Compete and a Non-Solicitation Agreement?

Like non-competes, non-solicitation agreements place restrictions on employees after employment has ended, but apply specifically to contact with the business’s employees and/or clients. Such agreements are meant to prevent former employees from “poaching” clients or employees from their former employer. Non-solicitation agreements are a less-restrictive alternative to non-compete agreements, which may involve a total prohibition against practice of a profession or trade in a given place, industry, and/or time period.

What is the Legal Status of Non-Competes in Texas?

Non-competes (covenants not to compete) are somewhat regulated in Texas; some but not all non-competes are enforceable. Section 15.50 of the Texas Business and Commerce Code outlines the conditions under which non-competes are enforceable. Texas law largely mirrors the common-law principles currently enforced by the FTC: namely, that non-competes are only enforceable if they:

• Are part of an otherwise legal and enforceable agreement; and,
• Any limitations placed on employees are “”

Additionally, as of September 1, 2025, the “Texas Covenants Not to Compete Act” (SB 1318) is in effect. This amendment to the Texas Business and Commerce Code further restricts non-competes when applied to health care practitioners. Some restrictions include:

• Durations are limited to one year maximum;
• Geographical restrictions are limited to a five-mile radius from the employee’s primary practice location; and,
• Agreements cannot prevent a practioner’s access to patient records when that request is authorized by the patient.

Assessing the Enforceability of a Non-Compete Clause in Texas

Texas’s approach to non-competes is comparable to the current FTC’s case-by-case approach, which is heavily informed by common law. Each employment agreement must be assessed on an individual basis to weigh the relative harms and benefits to the employer, employee, and the public interest.

Federal Law and FTC Guidance

The current FTC administration approach to non-competes is to assess agreements on a case-by-case basis against the standard of “reasonableness.” Enforcement is conducted with an eye toward facilitating competition and promoting commerce. To that end, some non-competes are enforceable, others are not. Assessing the federal enforceability of any given non-compete involves balancing relative harms: weighing the legitimate business interests of the employer against the good of the employee and the general public.

This common-law approach with its evaluation standard of “reasonableness” may seem vague to some. For clarity’s sake, we might look to a series of questions when assessing a particular non-compete agreement:

Does the agreement protect a legitimate business interest?

• Avoiding competition in general is not sufficient justification for a non-compete.[1]
• When the knowledge protected by a non-compete is highly specialized, the agreement is more likely to be considered appropriate.[2]

Is the agreement more restrictive than absolutely necessary to protect the employer’s legitimate business interests?

• Most non-competes should be limited to a particular location and/or time period.
• When possible, a less restrictive tool, like an NDA or non-solicitation agreement, should be utilized instead.

Does the agreement pose potential harm to the public good?

• Non-competes should not stifle competition in a way that harms employees. For example, it should not enable the employer to decrease employee benefits and wages, or degrade working conditions without fear of losing employees who have no other options.
• Some non-competes may make starting a new, competing business too costly for many to undertake. If this limits local access to a given professional service or skilled labor in an area, the non-compete may be too restrictive and come under scrutiny.

Texas State Law

When assessing the enforceability of a particular non-compete agreement under Texas State law, additional considerations apply. Non-compete agreements in Texas should:

• Include clearly delineated terms within the agreement;
• Be attached to an employment agreement that, separate from the non-compete clause, is legal and enforceable;

In the case of health care practitioners (e.g., a doctor, nurse, physician assistant, or dentist), further restrictions apply. A non-compete restricting health care practitioners may be unenforceable in Texas if it:

• Fails to provide a buy-out option;
• Extends beyond one year in scope;
• Extends beyond a geographical radius of five miles; or,
• Restricts access to patient records.

The Gray Area of Non-Competes in 2026

As administrations change, FTC leadership—and enforcement policy—shifts. This makes determining the enforceability of any given employment agreement more challenging. While some non-competes clearly exceed the bounds of law, many more occupy a gray area at the state and federal level. If you are involved in a non-compete agreement in Texas and are uncertain as to whether or not it is enforceable, consider speaking with an attorney versed in both Texas employment law and federal employment law.

Texas employment is subject to laws and regulations that differ significantly from those in other states. Consulting with a Texas employment lawyer can make all the difference. Tully Rinckey’s team of dedicated employment attorneys is available to assist you today. Please call 8885294543 to schedule a consultation, or schedule a consultation online.

Paul Friener is the Managing Partner of Tully Rinckey PLLC’s Austin, TX, office, where he focuses his practice on labor and employment law. Prior to joining Tully Rinckey, Paul was a supervising attorney at Legal Aid of NorthWest Texas, where he supervised the Legal Aid for Survivors of Sexual Assault (LASSA) division and was a team leader for the Immigration Practice team. His employment law experience includes representing employees who have been subjected to discrimination, harassment, or retaliation in connection to their legally protected class and legally protected activity, including whistleblower retaliation actions.  As an employee advocate, Paul represents federal and Texas employees regarding their legal issues in the workplace.

This article is for informational purposes only. Its content is not intended to constitute endorsement or legal advice, nor does it establish a client-lawyer relationship with Tully Rinckey PLLC or any of its affiliates.

[1] According to current FTC Chairman Ferguson’s stated enforcement principles, issued in his January 26, 2026 remarks at the FTC Workshop on Noncompete Agreements.

[2] The Texas State Workforce Commission’s guidance for Texas Employers offers several considerations for employers when determining the appropriateness of a non-compete, including this alluded-to “common calling doctrine.”