Texas non-compete law: Bus. & Com. Code 15.50 for recruiters

Texas enforces employee non-competes, within limits set by statute. Under Texas Business and Commerce Code section 15.50, a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement and its limits on time, geographical area and scope of activity are reasonable. If those limits go too far, the court must reform the covenant and enforce the narrower version rather than throw it out. Since September 1, 2025, non-competes for physicians, dentists, nurses and physician assistants must also meet fixed limits: one year, five miles, and a buyout no greater than the worker's annual salary and wages. That is the law as of October 2026.

For a recruiter, the practical meaning is that a Texas candidate's non-compete rarely disappears. It may get narrower. The questions you ask, and how you pass the answers to the hiring company, decide whether the client finds out before the offer or after the former employer's letter arrives. General screening questions are in non-compete questions for candidates, and the agency-side clauses are in non-solicitation clauses for recruiters.

What does Texas law say about non-competes?

The Covenants Not to Compete Act is Subchapter E of Chapter 15 of the Texas Business and Commerce Code. Section 15.50(a) says a covenant not to compete "is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made" to the extent its limits on time, geographical area and scope of activity "are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee."

Two tests sit in that sentence. The first is the link to another agreement. In Marsh USA Inc. v. Cook (2011), the Texas Supreme Court held that stock options given for a non-compete were reasonably related to the company's interest in protecting its goodwill, and wrote that consideration "reasonably related to an interest worthy of protection, such as trade secrets, confidential information or goodwill, satisfies the statutory nexus." The second is reasonableness: time, area and scope, measured against the business interest the employer is protecting.

Section 15.52 makes these criteria, and the procedures in section 15.51, "exclusive" and says they "preempt other law, including common law." Texas has no general pay threshold, no rule that the covenant be handed over days before an offer, and no ban for hourly workers. Those are the levers other states use; Texas uses the reasonableness test and court reformation instead.

What happens if a Texas non-compete is too broad?

Section 15.51 sets the procedure, and it is the part recruiters most often get wrong:

• Reformation is mandatory. If the covenant is ancillary to an otherwise enforceable agreement but its limits are unreasonable, "the court shall reform the covenant" to reasonable limits "and enforce the covenant as reformed." An overbroad clause is cut down, not thrown out.
• No damages before reformation. When a court has to reform, the employer may not recover damages for breaches before the reformation, and relief is limited to an injunction.
• Burden of proof. Where the agreement's primary purpose is to obligate someone to render personal services, as with an employment agreement, the employer carries the burden of showing the covenant meets section 15.50.
• Fees for overreaching. In a personal-services agreement, if the employee shows the employer knew when it was signed that the limits were unreasonable and then tried to enforce it more broadly than necessary, the court may award the employee costs and reasonable attorney's fees.

Example only: a Dallas account manager signed a two-year, statewide non-compete with access to the employer's pricing and client contacts. A court might decide the clause is too wide and reform it to, say, twelve months and the counties where the manager actually worked. The candidate is then still bound, just more narrowly. That is why "it looks too broad" is not an answer you can give a client.

What changed for health care workers on September 1, 2025?

SB 1318, signed on June 20, 2025 and effective September 1, 2025, rewrote the physician rules in section 15.50(b) and added section 15.501 for other health care practitioners. Under section 4 of the enrolled bill, the changes apply only to covenants entered into or renewed on or after September 1, 2025; older covenants stay under the law in effect when they were signed.

"Health care practitioner" in section 15.501 means a dentist licensed by the State Board of Dental Examiners, a professional or vocational nurse licensed under Chapter 301 of the Occupations Code, or a physician assistant licensed under Chapter 204. For physicians, the new subsection (b-1) says the practice of medicine does not include managing or directing medical services in an administrative capacity. Healthcare recruiters should therefore ask two extra facts: the license the candidate holds, and whether the covenant was signed or renewed before or after September 1, 2025.

Texas non-compete rules at a glance

What should a recruiter ask a Texas candidate?

Ask the same restrictive-agreement question of every candidate for the role, early in the phone screen, and write down facts only. The hiring company's counsel needs the facts that drive the Texas analysis: what the covenant was tied to, how far it reaches, and for health care roles, when it was signed.

TEXAS CANDIDATE — restrictive agreements

1. "Have you signed a non-compete, a customer or employee non-solicit,
    or a confidentiality agreement with your current or a past employer?"
2. "Roughly how long does it last after you leave, and what area or
    customers does it cover?"
3. "What was it part of: an offer letter, a stock or bonus plan, a
    promotion, the sale of a business?"
4. "Does it name which state's law applies or where disputes go?"
5. Health care roles: "Which license do you hold, and was the
    agreement signed or renewed before or after September 1, 2025?"
6. "Has your employer said anything about enforcing it?"
Always: "We don't want any confidential information, documents or
client lists from your current employer."

• Do not say "that won't hold up in Texas." Courts reform rather than void, so the honest answer is that the hiring company's lawyer will look at it.
• Do not ask the candidate to forward documents their agreement says are confidential, or to describe the employer's customers and pricing in detail.
• Do record "12-month non-compete, Dallas–Fort Worth, signed 2023 with stock award" rather than "probably unenforceable."

What is the risk to the hiring company?

Because a Texas court will usually narrow an overbroad covenant and then enforce it, the realistic outcome of a dispute is often an injunction that keeps the new hire away from certain customers, territory or work for a period. That can strand a placement after the start date. Former employers also sometimes name the new employer in the same lawsuit, for example claiming it interfered with the contract or received confidential information; how that plays out depends on what the new employer knew and did, which is a question for its counsel.

Practical steps that lower the risk: tell the client about the covenant before final interviews, let its counsel review the agreement before the offer, scope the role so the first months avoid the restricted customers or area where that is possible, and repeat in writing at the offer that the company wants no confidential information. The offer call script is the place to confirm that.

Is Texas likely to change its non-compete law again?

The Texas Legislature meets in regular session in odd-numbered years, convening on the second Tuesday in January under Government Code section 301.001, so the next regular session opens on January 12, 2027. The 2025 session produced SB 1318; the statute history on the Legislature's site shows no other change to sections 15.50 to 15.52 from that session. Any new bill would have to pass in the 2027 session or a special session. Check the statute page again before relying on this summary in 2027.

Where does the federal FTC rule stand?

It does not apply. The FTC's 2024 rule was set aside by a federal court in Texas; on September 5, 2025 the Commission voted 3-1 to dismiss its appeals and accede to the vacatur, and a February 12, 2026 Federal Register notice removed the rule from the Code of Federal Regulations. Texas law governs Texas covenants.

Staffing agencies and their own agreements

Agencies sit on both sides. When you place a candidate, the candidate's covenant is the client's risk. When your agency asks its own recruiters or contractors to sign a non-compete or non-solicit, section 15.50 applies to you as the employer, and the same reasonableness and reformation rules decide whether it holds. Client-side no-hire clauses raise separate antitrust questions, covered in no-poach agreements and antitrust law. For licensing and hiring basics, see the Texas staffing agency license guide and hiring employees in Texas.

A Texas checklist

• Restrictive-agreement question asked of every candidate, in the same words.
• Facts recorded: type, length, area or customers covered, what it was tied to, governing-law clause.
• Health care roles: license type and whether signed or renewed on or after September 1, 2025.
• No opinion on enforceability given; candidate pointed to their own lawyer.
• Hiring company told before final interviews; counsel reviews the agreement before the offer.
• "No confidential information" said at the screen and again at the offer.
• Statute re-checked after the 2027 session.