On April 23, 2024, the Federal Trade Commission made one of the most sweeping labor-law announcements in a generation: it was banning virtually all non-compete agreements in the United States. For the roughly 30 million American workers bound by these clauses — including millions in Texas — it sounded like liberation was finally at hand.
It didn't survive the business day.
Within hours of the rule's publication, a tax services firm headquartered on the Dallas North Tollway in Plano, Texas — a company called Ryan LLC — filed a lawsuit in the U.S. District Court for the Northern District of Texas challenging the FTC's authority to issue such a sweeping rule. Ryan argued that Congress had never granted the FTC the power to outlaw non-compete agreements by regulatory fiat, that the agency had overreached, and that the rule was arbitrary and capricious. On July 3, 2024, federal Judge Ada Brown granted a preliminary injunction halting the rule. On August 20, 2024, she struck it down entirely — for the whole country.
The nationwide non-compete ban was born and killed in Texas, all within a single year. The FTC appealed, then quietly abandoned the fight in 2025. And so the question that millions of Texas professionals — physicians in Frisco, software developers in McKinney, sales managers in Allen — are now asking is the same one they've always had to ask: is my non-compete actually enforceable?
Texas Law on Non-Compete Agreements
Non-compete agreements — formally called "covenants not to compete" — are governed in Texas by Chapter 15 of the Texas Business & Commerce Code, known as the Texas Covenants Not to Compete Act. Unlike California, which has banned non-competes almost entirely, Texas takes a measured approach: these agreements are legal, but they must earn enforceability by meeting specific requirements.
The statute requires that a non-compete be "ancillary to or part of an otherwise enforceable agreement." The restrictions must also be "reasonable in time, geographical area, and scope of activity to be restrained." Simple enough in the abstract. In the courtrooms of Dallas, Fort Worth, and across the Northern District of Texas, however, those words generate years of litigation.
The Texas Supreme Court's decision in Marsh USA Inc. v. Cook — still a touchstone — clarified that employers can obtain valid non-competes when they provide genuine value to the employee in return: access to trade secrets, proprietary client information, or specialized training that the employee would not otherwise receive. What courts have consistently refused to enforce is the kind of non-compete that employers hand to long-tenured employees years after hiring, with nothing more than continued employment as the supposed consideration. In Texas, a job you already have is not enough to make a new restriction binding.
The Four Questions Every Texas Court Asks
When an employer sues to enforce a non-compete in Texas, courts evaluate four essential questions. Understanding them tells you a great deal about your exposure — or your leverage.
First: Was it ancillary to an enforceable agreement? The non-compete must be tied to something real and contemporaneous — a confidentiality agreement executed at hire, a promise to share proprietary business processes, or training in a specialized methodology the company developed. A bare-naked restriction signed in isolation, with no corresponding benefit flowing to the employee, typically fails this test.
Second: Is the time restriction reasonable? Texas courts generally tolerate one-to-two year restrictions and look skeptically at anything beyond three years. A multi-year restriction may survive for a C-suite executive given access to years of strategic planning — but is almost certainly overbroad for a mid-level account manager in Plano.
Third: Is the geographic restriction reasonable? The covered territory must reflect where the employer actually operates and where you actually worked, not where the employer wishes it operated. A statewide restriction applied to an employee who covered a single Collin County sales territory invites judicial skepticism. Conversely, a restriction limited to the DFW Metroplex — where the employer's actual client base exists — is more defensible.
Fourth: Is the scope of restricted activity reasonable? The agreement should limit what you actually did for that employer, not lock you out of an entire profession. A recruiter can reasonably be restricted from recruiting in the same niche for a competitor. The same recruiter cannot lawfully be barred from all employment-related work, anywhere, indefinitely.
The Blue Pencil Problem: Why "Too Broad" Doesn't Mean "Unenforceable"
Here is the fact that surprises most Texas workers when they learn it: if a court determines that your non-compete is overbroad, the court does not simply throw it out. Under the Texas Covenants Not to Compete Act, a court is specifically authorized — and in some circumstances required — to reform an unreasonable agreement and enforce the reformed version.
This is what employment lawyers call the "blue pencil doctrine," and it changes the calculus considerably. Imagine an employee who signs a statewide, three-year non-compete that any reasonable lawyer would call excessive. If that employee leaves to work for a competitor and the employer sues, the court might well reform the restriction to a twelve-month, Dallas-area agreement — and then enforce that against the employee. The employee does not walk away free. They walk away with a narrower cage.
The practical implication: do not assume that an overreaching non-compete is worthless paper. It may be enforceable in a modified form. Get a legal review before you take that competing job, not after you are served with a temporary restraining order.
Healthcare Workers: A New Chapter Under SB 1318
For Texas physicians, nurses, dentists, and physician assistants, 2025 brought a significant shift. Senate Bill 1318, signed into law by Governor Abbott and effective September 1, 2025, imposed strict new limits on non-compete agreements for healthcare practitioners — a direct response to years of complaints that hospital systems were using overbroad restrictions to trap doctors in positions they wanted to leave.
Before SB 1318, a large hospital group in North Texas could enforce a non-compete covering a 30-mile radius for two or three years, with a buyout clause demanding sums that could easily reach six figures. Physicians who wanted to leave felt financially coerced to stay, or forced to relocate their entire families to practice elsewhere.
SB 1318 changes that calculus for any agreement entered into or renewed on or after September 1, 2025. For physicians specifically:
- Duration is capped at one year from the date your contract or employment ends.
- Geographic area is capped at a five-mile radius from the location where you primarily practiced.
- Buyout amounts are capped at your annual salary and wages — no more buyout demands that dwarf your actual earnings.
- If you are fired without good cause, the non-compete is void and unenforceable as a matter of law. No litigation required.
The law extends similar (though not identical) protections to dentists, licensed vocational nurses, and physician assistants. If you signed your contract before September 1, 2025, the pre-SB 1318 rules may still apply. If your contract was renewed after that date, you are entitled to the new protections.
For North Texas physicians considering a move — from a hospital system in Frisco to a private practice in McKinney, for example — SB 1318 may represent the single most important development in Texas healthcare employment law in a decade. Know whether your agreement is governed by the old rules or the new ones before you make a move.
What the Ryan LLC Saga Actually Tells Us
It is worth dwelling on the irony embedded in the Ryan LLC story. A Plano company — headquartered in the same DFW metro that WG Law serves — walked into federal court and killed a rule that would have freed millions of American workers from non-compete restrictions. The nationwide liberation failed in Texas.
That outcome was not a judgment about whether non-competes are good policy. Judge Brown's ruling turned on administrative law — whether the FTC had the statutory authority to issue such a sweeping rule at all. She concluded it did not, and the Fifth Circuit has long been skeptical of expansive agency power. But the practical effect is the same: federal law offers no protection from a non-compete. Your fight, if you choose to have one, happens under Texas law, in Texas courts.
And Texas law, while not unfriendly to employees, does give employers real tools. Courts here enforce these agreements when they are reasonable. They reform them when they are not. The employee who simply assumes the agreement won't hold up, and accepts a competing job without counsel, often learns otherwise at a very inconvenient time.
Practical Steps for Texas Workers and Business Owners
Whether you are an employee navigating a potential job change, or a business owner wondering whether your own agreements will protect you, a few principles apply.
For employees: read your agreement before you act. Understand the time period, geography, and scope of restriction. Document any benefits you received at the time of signing — training programs, access to proprietary systems, client lists. If your employer terminated you without cause, that fact may give you leverage. And if you are in healthcare, check whether your agreement pre-dates SB 1318.
For business owners: a non-compete that is not properly anchored — not tied to real consideration, not limited to reasonable territory and time — may be worthless when you need it most. The business attorneys at WG Law work with entrepreneurs and closely-held companies throughout the DFW area to ensure that employment agreements are properly structured. A reformed agreement that a court enforces in narrowed form is better than no agreement at all — but a properly drafted agreement is better still.
For either side: if a dispute reaches the point of litigation, time matters enormously. Employers seeking a temporary restraining order to prevent a former employee from competing can often obtain emergency relief within days. Employees have a very short window to challenge such an order. If you find yourself in that position, the litigation attorneys at WG Law are available for urgent consultation.
The Bottom Line
Texas sits in a peculiar place in the national non-compete debate. The state was the battlefield where the FTC's sweeping ban was defeated. And yet Texas has its own body of case law that subjects non-competes to meaningful scrutiny. SB 1318 demonstrates that the legislature is willing to intervene when the imbalance becomes too stark — as it concluded it had in healthcare.
For most Texas professionals, the practical message is this: your non-compete may or may not be enforceable, and the answer depends on specific facts — what you signed, when you signed it, what you received in return, and how broadly the restriction is drawn. The stakes can be significant. A court can issue an injunction that stops you from working in your field. It can award damages. It can order you to pay attorneys' fees.
The time to understand your non-compete is not after your former employer's attorneys call. It is now, while you still have room to plan.
At WG Law, our attorneys serve professionals and business owners throughout McKinney, Frisco, Plano, Allen, and the greater DFW Metroplex. Whether you are reviewing an employment agreement, forming a business, or navigating a commercial dispute, contact us to schedule a consultation.
This article is for general informational purposes only and does not constitute legal advice. Laws change; individual circumstances vary. Consult a qualified Texas attorney for advice specific to your situation.