If you’re a small business owner, employer, or professional in Texas, you’ve likely encountered a non-compete agreement at some point—either signing one as an employee or asking your team to sign one to protect your business. These contracts, designed to prevent employees from jumping ship to a competitor or starting a rival company, have long been a staple of business protection. But in 2025, their enforceability is under scrutiny, both nationally and here in the Lone Star State. Are non-competes still a viable tool for Texas businesses? The short answer: Yes, but with caveats. Let’s break it down—and explain how O’Neill can help you navigate this shifting legal landscape.
The National Debate: A Changing Tide
In recent years, non-compete agreements have faced growing criticism across the U.S. Critics argue they stifle worker mobility, suppress wages, and hinder innovation—especially in fast-moving industries like tech or healthcare. In April 2024, the Federal Trade Commission (FTC) took a bold step, issuing a rule to ban most non-compete agreements nationwide, citing unfair competition. However, that rule was struck down by a federal judge in Texas on 2024, leaving the issue in limbo as appeals loom. For now, the FTC ban is on hold, and state laws—like those in Texas—still govern.
This national uncertainty has Texas employers and employees asking: What’s the status here? Fortunately, Texas has a well-established framework for non-competes, but it’s not a free-for-all. The rules are strict, and courts are quick to strike down overly broad agreements. Here’s what you need to know in 2025.
Texas Non-Compete Law: The Basics
Unlike some states (e.g., California, where non-competes are largely unenforceable), Texas permits these agreements under specific conditions outlined in the Texas Business and Commerce Code. For a non-compete to hold up in court, it must:
- Be Ancillary to an Otherwise Enforceable Agreement: The non-compete must be part of a broader deal, like an employment contract or a business sale.
- Have Reasonable Limits: Restrictions on time, geographic scope, and the type of work must be “reasonable” and not impose undue hardship on the employee.
- Protect a Legitimate Business Interest: This could include trade secrets, confidential information, or customer relationships—not just preventing competition for its own sake.
For example, a Houston tech firm might ask a software developer to sign a non-compete barring them from working for a rival within 50 miles for one year after leaving. If the restriction protects proprietary code and isn’t overly punitive, a Texas court might uphold it. But a five-year, statewide ban for a retail clerk? That’s likely toast.
What’s New in 2025?
While Texas law hasn’t seen major legislative changes to non-competes in 2025, the national FTC debate has ripple effects. Courts and employers are paying closer attention to fairness and necessity. Plus, recent Texas news—like the NYSE Texas launch in Dallas on March 31, 2025—highlights the state’s growing business appeal. As companies relocate here, they’re bringing employees with out-of-state non-competes, raising questions about enforceability across state lines. Non-competes remain a tool to safeguard your business, but they must be crafted carefully to survive legal challenges.
Common Pitfalls—and How to Avoid Them
Texas courts have a history of reforming or voiding non-competes that overreach. Here are mistakes to watch out for:
- Overly Broad Scope: A Dallas restaurant once tried to bar a chef from working anywhere in the metroplex for two years. The court slashed it to six months and a five-mile radius.
- No Clear Business Interest: If you can’t prove the employee has access to sensitive info, the non-compete won’t stick.
- Ignoring Employee Hardship: A restriction that leaves someone unable to earn a living in their field is a red flag.
To get it right, work with a legal team that understands Texas law. A well-drafted non-compete can protect your customer base or trade secrets without inviting a lawsuit.
Employees: Know Your Rights
If you’ve signed a non-compete in Texas, don’t assume it’s ironclad. Courts often side with employees when restrictions are unreasonable. Before taking a new job or starting a business, have the agreement reviewed. You might have more freedom than you think—or a chance to negotiate an exit.
How O’Neill Law Firm Can Help
At O’Neill Law, we’ve seen non-compete disputes from both sides—employers protecting their interests and employees fighting unfair limits. Our Business Law team can:
- Draft Enforceable Agreements: We’ll tailor your non-compete to meet Texas standards, balancing protection with defensibility.
- Review Existing Contracts: Whether you’re an employer enforcing a non-compete or an employee challenging one, we’ll assess its strength.
- Litigate Disputes: If a non-compete lands you in court, our Litigation team is ready to advocate for you.
By narrowing the geographic scope and clarifying protected interests, we can keep the agreement enforceable—and the business secure.
Looking Ahead: Non-Competes in a Growing Texas Economy
With Texas’s business boom—think NYSE Texas and tech hubs like Austin—non-competes will stay relevant in 2025. But as competition for talent heats up, employers must adapt. A poorly written agreement risks losing both legal battles and key staff. Employees, meanwhile, have more leverage to push back.
Take Action Today
Whether you’re a business owner safeguarding your future or a professional weighing your options, non-compete agreements in Texas are a legal tightrope. Don’t go it alone. Contact O’Neill Law for a consultation to review, draft, or defend your non-compete strategy. Visit https://rcolawfirm.com/contact/ and contact us today! Let’s ensure your interests are protected in 2025 and beyond.