What clauses are required in a Texas Non-Compete/Non-Disclosure Agreement?

Texas law requires specific provisions including: Ancillary to Enforceable Agreement, Reasonable Limitations Provision, Severability and Judicial Reformation. contract.diy automatically includes all mandatory clauses with proper legal citations when generating your Non-Compete/Non-Disclosure Agreement.

What terms are prohibited in a Texas Non-Compete/Non-Disclosure Agreement?

Under Texas law, certain provisions are void or unenforceable, including: Worldwide restriction or restriction without geographic limitation; Non-compete duration exceeding 5 years. contract.diy is built to avoid these terms and will warn you if your description suggests including something that's not legally permissible.

How does contract.diy ensure my Non-Compete/Non-Disclosure Agreement complies with Texas law?

Every generated contract goes through 9 automated compliance checks specific to Texas. These cover mandatory provisions, prohibited terms, proper citations, and formation requirements. Any issues are flagged before you download.

Can I use this Non-Compete/Non-Disclosure Agreement template outside of Texas?

This template is specifically tailored to Texas law. Using it in another jurisdiction may result in missing requirements or including provisions that don't apply. We recommend generating a new contract with the correct jurisdiction selected for full compliance.

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Non-Compete/Non-Disclosure Agreement for Texas

Generate a non-compete/non-disclosure agreement that complies with Texas law — with 4 mandatory clauses and 9 compliance checks built in.

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Key legal considerations

You are generating a non-compete agreement governed by Texas law. CRITICAL TEXAS REQUIREMENTS: (1) Under Tex. Bus. & Com. Code § 15.50, a non-compete is enforceable ONLY if it is ancillary to an otherwise enforceable agreement AND contains limitations as to time, geographical area, and scope of activity that are reasonable and do not impose a greater restraint than necessary. (2) The consideration must give rise to the employer's interest in restraining competition — mere at-will employment is NOT sufficient (Sheshunoff, 209 S.W.3d 644). Acceptable consideration includes: access to trade secrets, specialized training, stock options/equity (Marsh USA, 354 S.W.3d 764). (3) Safe harbor: 2-year maximum duration, geographic scope limited to employee's actual service area, activity limited to directly competitive work. (4) Texas courts WILL reform overbroad restrictions under § 15.51(c) rather than void them entirely. (5) Include a severability/reformation clause. (6) Texas is a community property state — consider implications for spouse's interest in business assets.

What's required

Mandatory clauses for a valid non-compete/non-disclosure agreement under Texas law.

Ancillary to Enforceable Agreement
Tex. Bus. & Com. Code § 15.50(a)
Reasonable Limitations Provision
Tex. Bus. & Com. Code § 15.50(2)
Severability and Judicial Reformation
Tex. Bus. & Com. Code § 15.51(c)
Specific Consideration Identification
Tex. Bus. & Com. Code § 15.50(a); Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644 (Tex. 2006)

What's prohibited

Terms and provisions that are void or unenforceable under Texas law.

Worldwide restriction or restriction without geographic limitation
Texas requires non-competes to have reasonable geographic limitations. A worldwide or geographically unlimited restriction is presumptively unreasonable under Tex. Bus. & Com. Code § 15.50(2), though courts may reform rather than void such provisions.
Tex. Bus. & Com. Code § 15.50(2)
Non-compete duration exceeding 5 years
While Texas does not set a statutory maximum, courts generally find durations over 2 years suspect and over 5 years unreasonable. A 2-year maximum is the safe harbor for most employment-related non-competes.
Tex. Bus. & Com. Code § 15.50–15.51
Continued employment as the sole consideration for the non-compete
Under Texas law since the 2009 amendments, at-will employment alone is insufficient consideration for a non-compete. The employer must provide additional consideration such as access to trade secrets, specialized training, or stock options.
Tex. Bus. & Com. Code § 15.50(a); Sheshunoff, 209 S.W.3d 644

Legal references

Key statutes and regulations that govern non-compete/non-disclosure agreements in Texas.

Texas Covenants Not to Compete Act
Tex. Bus. & Com. Code § 15.50
Core statute governing enforceability of non-compete agreements in Texas. Requires the covenant be ancillary to an otherwise enforceable agreement, supported by consideration, and reasonable in time, geographic area, and scope.
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Texas Non-Compete Remedies and Reformation
Tex. Bus. & Com. Code § 15.51
Provides for judicial reformation of overbroad non-competes and allows recovery of attorneys' fees, court costs, and reasonable expenses.
Texas Non-Compete Preemption
Tex. Bus. & Com. Code § 15.52
Preempts all other Texas law related to non-compete enforceability and establishes the Business & Commerce Code as the exclusive framework.
Alex Sheshunoff Mgmt. Servs. v. Johnson
209 S.W.3d 644 (Tex. 2006)
Key Texas Supreme Court case establishing that consideration for non-competes must be linked to the employer's interest in restraining competition (e.g., trade secrets, specialized training).
Marsh USA Inc. v. Cook
354 S.W.3d 764 (Tex. 2011)
Texas Supreme Court held that stock options and equity can constitute sufficient consideration for non-compete agreements.