Texas Employment Contract Review
Texas enforces non-competes, but only if they are ancillary to an otherwise enforceable agreement, which in practice usually means the employer actually gave you confidential information or specialized training. Texas courts reform overbroad terms rather than strike them. In 2025 the Legislature tightened rules for physicians and other health practitioners, and Texas Labor Code deadlines for a fired employee's pay are short.
Non-compete in Texas
Generally enforceable if reasonable
Are non-competes enforceable in Texas?
Here is Texas non-compete law in plain English, with the statute it rests on.
Enforceable if ancillary to an otherwise valid agreement and reasonable in scope; courts will reform overbroad terms. Since September 1, 2025, SB 1318 limits physician and some other healthcare non-competes to 1 year and 5 miles.
Governing law: Texas Business & Commerce Code §15.50.
Whatever the label in your contract, Texas courts look at whether the restriction is reasonable in duration, geography, and scope. A nationwide, multi-year, whole-industry ban is far more likely to be narrowed or struck down than a narrow one.
Who owns what you invent in Texas?
Texas does not have a specific personal-invention carve-out statute, so a broad IP-assignment clause can reach more of what you create, potentially including side projects. Read the assignment scope and push to limit it to work actually related to your job.
Arbitration and class-action waivers in Texas
Texas generally follows the federal rule that arbitration agreements are enforceable. Before you sign, check whether the clause is mutual and whether it waives your right to a class or collective action, you are usually giving up the right to sue in court.
What makes a Texas non-compete enforceable?
Under Tex. Bus. & Com. Code 15.50, the covenant must be ancillary to an otherwise enforceable agreement and reasonable in time, area and scope of activity. The Texas Supreme Court has held that an employer's promise to provide confidential information becomes enforceable once it actually delivers that information (Alex Sheshunoff Management Services v. Johnson, 2006), and that stock options can qualify when tied to goodwill (Marsh USA v. Cook, 2011).
SB 1318, effective September 1, 2025, limits physician non-competes to one year and five miles from the primary practice location, caps any buyout at the physician's total annual salary and wages, and voids the covenant if the physician is discharged without good cause. The law extends many of these rules to dentists, nurses and physician assistants, and it applies to covenants entered into or renewed on or after September 1, 2025.
When does Texas require final pay?
Under Texas Labor Code 61.014, an employee who is discharged must be paid in full within six calendar days. An employee who quits is paid by the next regular payday. Commissions and bonuses are due under the terms of the agreement that governs them (Labor Code 61.015), so the written commission plan controls timing. If an employer misses these deadlines, you can file a wage claim with the Texas Workforce Commission, generally within 180 days of the date the wages were due.
Texas sources checked 2026-10-09: Haynes Boone, Texas noncompete law for physicians and healthcare workers takes effect September 2025 · Texas Constitution and Statutes, Labor Code chapter 61. Laws change; confirm the current rule before relying on it.
What ClauseAudit checks in a Texas employment contract
- Non-compete enforceability under Texas law and whether the scope is reasonable
- IP / invention-assignment scope and any personal-time carve-out
- Mandatory arbitration and class-action waiver
- At-will terms and asymmetric notice or severance
- Equity vesting, cliffs, and bad-leaver forfeiture
- Discretionary bonus criteria and clawback provisions
Texas employment contract FAQ
Are non-competes enforceable in Texas?
In Texas, a non-compete is generally enforceable if it is reasonable in time, geography, and scope (see Texas Business & Commerce Code §15.50). Enforceable if ancillary to an otherwise valid agreement and reasonable in scope; courts will reform overbroad terms. Since September 1, 2025, SB 1318 limits physician and some other healthcare non-competes to 1 year and 5 miles.
Can my Texas employer own inventions I make on my own time?
Texas does not have a specific statute carving out personal-time inventions, so a broad IP-assignment clause can reach more of what you create. Read the assignment scope carefully and ask to limit it to work related to your job.
Do I have to sign a mandatory arbitration agreement in Texas?
Texas generally follows the federal rule that arbitration agreements are enforceable. Check whether the clause is mutual and whether it waives your right to a class action, and know that you are usually giving up the right to sue in court. Everywhere in the US, the federal Ending Forced Arbitration Act lets you take sexual harassment and sexual assault claims to court even if you signed one.
What makes a non-compete reasonable in Texas?
Texas does not set a presumptive maximum term, so reasonableness is assessed on the whole restriction rather than against a number: how long it runs, how much geography it covers, how broadly it defines the restricted activity, and whether it protects something the employer can genuinely claim an interest in. A restriction that is narrow on one of those and broad on the rest is still vulnerable.
What if I work in Texas but my employer is in another state?
It matters, because Texas's neighbours do not all treat non-competes the same way: Oklahoma (void). Which state's law applies turns on the governing-law and venue clauses in your contract and on where the work is actually performed, so those two clauses are worth reading closely before you sign.
Does it help that Oklahoma voids non-competes?
Only if that state's law actually applies to you. Living next to Oklahoma does not import its rule into a Texas contract. What governs is the contract's choice-of-law clause and where you perform the work, which is exactly why those clauses deserve attention.
If a Texas non-compete is too broad, does it get narrowed or thrown out?
Courts may rewrite an overbroad restriction to something reasonable. That cuts against you: an employer has little to lose by drafting wide, because a court can pare the clause back rather than discard it. Negotiating the wording before signing matters more here than in states where an overbroad clause simply fails.
Is there anything specific to Texas worth knowing?
SB 1318, for covenants entered into or renewed from 1 September 2025, limits physician and some other healthcare non-competes to 1 year and 5 miles.
What else should I check in a Texas employment contract?
Beyond the non-compete: how invention assignment is worded and whether it reaches work done on your own time; whether disputes go to arbitration and whether class actions are waived; whether notice periods are symmetrical between you and the employer; and how any equity vests, including what happens if you leave before a cliff.
Can I be fired in Texas for refusing to do something illegal?
Texas recognizes a narrow exception to at-will employment from Sabine Pilot Service v. Hauck (1985): an employer cannot fire an employee solely for refusing to perform an illegal act that carries criminal penalties. The employee must show the refusal was the sole reason. Texas courts have declined to expand this into a broader public policy exception.
My Texas commission plan says unpaid commissions are forfeited when I leave. Is that legal?
Often it is. Texas Labor Code 61.015 makes commissions payable according to the terms of the commission agreement, so a clear written forfeiture or 'must be employed on payout date' term is generally enforced. Earned base wages, by contrast, must be paid on the 61.014 schedule. Negotiate payout of commissions on deals you closed before signing.
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Texas: the governing law
- Statute
Tex. Bus. & Com. Code §§ 15.50-15.52- If the clause is too broad
- Courts may rewrite an overbroad restriction to something reasonable.
- Worth knowing
- SB 1318, for covenants entered into or renewed from 1 September 2025, limits physician and some other healthcare non-competes to 1 year and 5 miles.
Statute and reformation approach from Beck Reed Riden LLP, Employee Noncompetes: A State-by-State Survey, 2026-01-21. Verify against the current text before relying on it.
How Texas compares with neighbouring states
Texas does not treat non-competes the same way as every state it borders, which matters when a contract names another state's law. 1 of its 4 neighbours take a different approach.
Nationally: 4 jurisdictions treat employee non-competes as void, 13 allow them only in limited circumstances, and 34 generally enforce them if reasonable.
State law summarized as of 2026-10-09; statutes change frequently. This is Automated educational information, not legal advice. Always consult a qualified Texas attorney before signing.