The Texas courts have long had a love/hate relationship with noncompete agreements. For some time, such restrictions were considered unenforceable until the legislature stepped in four decades ago. While referring to such agreements as “restraints of trade,” the legislature nonetheless provided guidelines for drafting such agreements in an ostensibly enforceable manner. However, practitioners in this area of law know that the space between a well-drafted agreement and the enforcement of that agreement is not a straight line. And now the Federal Trade Commission (FTC) has stepped into the fray attempting to outlaw all “noncompete” agreements entirely. This article discusses the strategies employers may use, with or without noncompetes, to protect their most guarded information and work product and how the Texas courts have dealt with these issues.

On April 23, 2024, the FTC announced a new rule intended to ban noncompete agreements for all employees, including senior executives. 89 FR 38342 (2024). While the rule permits the continued enforcement of noncompete agreements for certain senior executives entered into before Sept. 4, 2024, the effective date of the rule, and noncompete agreements connected to an individual’s sale of a business, these exceptions provide little solace for employers who rely on noncompetes to protect against unfair competition. The FTC’s Non-Compete Clause Rule reflects a growing sentiment among legislators and judges nationally that noncompetes are unfair to the individuals restricted by those agreements. Multiple lawsuits have now been filed in the federal courts in Texas seeking to invalidate the rule nationwide on the basis that it violates the U.S. Constitution, and the FTC exceeded its authority under the Federal Trade Commission Act. As of the date of this writing, no court has taken action, but it is widely expected that the rule will be delayed and, in fact, may not ever become effective.