Deconstructing Texas’ Covenants Not to Compete Act

Texas’ Covenants Not to Compete Act (“the Act”) has been in existence for over 30 years. During the first half of its existence, the Act was interpreted in a manner that made it extremely difficult for an employer to establish adequate consideration. This changed following a series of Texas Supreme Court opinions beginning in 2006, which significantly expanded the requisite consideration that may support an enforceable noncompete covenant.

In the wake of this precedent, the battleground for present-day noncompete litigation rarely centers on whether the covenant is supported by adequate consideration. Instead, disputes over enforceability most often now hinge on reasonableness—whether the covenant is narrowly tailored and no greater than necessary to support an employer’s legitimate business interests. And, because the Act requires courts to reform noncompete covenants that are otherwise overbroad, it is now significantly harder to defeat such covenants in their entirety.