Non-Compete Agreements in 2026: The Current Legal Landscape
The legal landscape around non-compete agreements has shifted significantly over the past 18 months – and if you haven’t reviewed your agreements recently, you may be operating on assumptions that no longer hold. Whether you’re trying to protect your business from a departing employee or you’ve inherited a stack of agreements drafted five years ago, here’s what the current state of the law actually means for you.
Key Takeaway:
Non-compete agreements remain enforceable in some states in 2026, including Texas, but the rules are more complex than they were several years ago. The FTC’s nationwide ban did not take effect, but federal scrutiny continues on a case-by-case basis. Business owners should review their agreements for enforceability, especially if they operate across state lines, employ remote workers, or work in healthcare.
The FTC’s Ban Is Dead – But That Doesn’t Mean Business as Usual
In April 2024, the Federal Trade Commission announced a sweeping rule that would have banned virtually all non-compete agreements nationwide. It never took effect. On August 20, 2024, U.S. District Judge Ada Brown in the Northern District of Texas set aside the rule in Ryan LLC v. Federal Trade Commission, holding that the FTC exceeded its statutory authority and that the rule was arbitrary and capricious under the Administrative Procedure Act.
For businesses that celebrated that ruling, a word of caution: the FTC hasn’t walked away from this space. Under Section 5 of the FTC Act, the agency retains authority to challenge specific non-compete agreements it considers unfair on a case-by-case basis. FTC Chairman Andrew Ferguson has made clear that enforcement will focus on agreements that cause the most damage – particularly those applied to lower-wage workers and those in the healthcare sector.
So while there’s no federal ban, federal scrutiny has not disappeared. It’s simply changed shape.
Why State Non-Compete Laws are Getting More Complicated
The Patchwork of State Law Is Getting More Complex. With no federal floor, non-compete enforceability now depends almost entirely on where your business operates and where your employees work. State legislatures have been increasingly active: in 2025 alone, 13 states enacted or implemented legislation affecting non-compete enforceability, with more anticipated in 2026 – particularly targeting healthcare workers and imposing salary thresholds below which non-competes cannot be used.
Broadly speaking, states fall into three categories. Full-ban states – California, North Dakota, Minnesota, and Oklahoma among them – prohibit employment non-competes outright, with narrow exceptions for the sale of a business. Income-threshold states permit non-competes only for employees earning above specified salary levels. And traditional enforcement states allow non-competes subject to reasonableness standards – a category that includes Texas.
If your business operates across state lines, an agreement that works in Texas may be wholly unenforceable the moment your employee relocates or works remotely from another jurisdiction. Choice-of-law clauses help, but they don’t always override the law of the state where the employee actually performs their work.
What Texas Law Requires for a Non-Compete Agreement
Texas remains a state where properly drafted non-compete agreements are enforceable – but the standard is more demanding than many business owners realize.
Under the Texas Business and Commerce Code, a non-compete covenant must meet three requirements. First, it must be ancillary to an otherwise enforceable agreement. A standalone non-compete signed at the time of a promotion, with no corresponding exchange of value, will typically fail. The most reliable method is tying the non-compete to a concurrent agreement to provide confidential information, trade secrets, or specialized training – and the employer must actually follow through on that promise. Second, it must be reasonable as to time, geographic area, and scope of activity. Courts have generally treated durations of one to two years as presumptively reasonable; geographic restrictions must be tied to where the employee actually worked or the employer’s genuine competitive footprint. Statewide or nationwide restrictions on entry-level employees rarely survive scrutiny. Third, it must be no more restrictive than necessary to protect a legitimate business interest. The scope of prohibited activity must relate to what the employee actually did – not simply bar them from working in an entire industry.
Consideration matters. Texas courts have consistently held that at-will employment alone, a pay raise, or a bonus are generally insufficient consideration for a non-compete signed by an existing employee. Meaningful consideration – access to proprietary client lists, enrollment in a specialized training program, or an equity grant – significantly strengthens enforceability.
The blue-pencil doctrine cuts both ways. Under Texas law, if a court finds your non-compete overly broad, it is required to reform the covenant – narrowing it to a reasonable scope and enforcing that modified version. Your overbroad agreement won’t simply be thrown out, but the reformed version may afford far less protection than you intended. Draft carefully; don’t rely on blue-penciling to salvage a sloppy agreement.
New Non-Compete Restrictions for Healthcare Businesses
If your business involves healthcare practitioners, the changes are even more significant. SB 1318 – the Texas Covenants Not to Compete Act – took effect September 1, 2025, imposing additional statutory restrictions for non-competes with healthcare practitioners. Geographic restrictions are capped at a five-mile radius from the practitioner’s primary practice location. Agreements cannot be used to prevent a practitioner from accessing patient records when authorized by the patient.
Layered on top of that are the FTC’s September 2025 warning letters, which specifically called out healthcare employers and staffing firms. If you operate a medical practice, dental practice, or any healthcare-adjacent business and haven’t reviewed your agreements since August 2025, that review is overdue.
The Practical Takeaways for Business Owners
Audit your existing agreements now. Many businesses are operating with templates drafted years ago that haven’t been updated to reflect current law. An agreement that seemed airtight in 2020 may have critical gaps today – particularly around the consideration provided at signing, geographic scope, and healthcare-specific restrictions. A one-time review is a modest investment compared to the cost of litigating an unenforceable agreement.
Don’t over-rely on non-competes. In an environment of increasing restriction, sophisticated businesses are placing greater emphasis on narrowly tailored non-disclosure agreements (NDAs) and non-solicitation agreements – provisions that prohibit departing employees from soliciting the firm’s clients or recruiting its employees. These tools are generally more defensible than broad non-competes, survive better across state lines, and are less likely to be invalidated by a single court ruling.
Think multistate from the start. If there’s any possibility an employee might work remotely or relocate, structure the agreement with that in mind. Identify which state’s law governs, understand whether that choice will be honored where the employee actually works, and consider whether the agreement needs to comply with the law of multiple jurisdictions to be useful.
When you enforce, enforce promptly. Non-competes are most effectively enforced through a request for temporary injunctive relief filed quickly after a departure. Delay undermines your argument that the threatened harm is irreparable – courts have denied injunctions where the employer waited weeks before acting while competitive harm continued to mount.
The Bottom Line: Review Your Non-Compete Agreements Before a Dispute
The death of the FTC’s national ban has given some businesses a false sense that the non-compete landscape has stabilized. It hasn’t. The patchwork of state law is growing more complex by the year, federal enforcement has shifted to a case-by-case model targeting the most egregious agreements, and Texas has added new statutory restrictions for healthcare practitioners. If you haven’t reviewed your non-compete agreements in the past 12 months, now is the time – before a key employee departs and you discover your protection isn’t what you thought it was.
Frequently Asked Questions About Non-Compete Agreements in 2026
Are non-compete agreements banned in 2026?
No. The article explains that the FTC’s proposed nationwide ban never took effect. However, federal scrutiny has not disappeared because the FTC may still challenge specific non-compete agreements on a case-by-case basis.
Is the FTC non-compete ban still in effect?
No. The article states that the FTC rule was set aside in Ryan LLC v. Federal Trade Commission before it took effect.
Are non-compete agreements enforceable in Texas?
Yes, properly drafted non-compete agreements may still be enforceable in Texas. The article explains that Texas requires the covenant to be tied to an otherwise enforceable agreement, reasonable in time, geographic area, and scope, and no broader than necessary to protect a legitimate business interest.
What makes a Texas non-compete agreement stronger?
The article explains that meaningful consideration can strengthen enforceability. Examples given include access to proprietary client lists, specialized training, confidential information, trade secrets, or an equity grant.
Can a Texas court revise an overbroad non-compete?
Yes. The article explains that Texas courts may reform an overly broad covenant by narrowing it to a reasonable scope and enforcing the modified version.
Why do multistate or remote employees create risk for non-compete agreements?
The article explains that an agreement that works in Texas may be unenforceable if an employee relocates or works remotely from another jurisdiction. Choice-of-law clauses may help, but they do not always override the law of the state where the employee actually works.
Are healthcare non-competes treated differently in Texas?
Yes. The article explains that Texas added healthcare-specific restrictions, including a five-mile geographic cap from the practitioner’s primary practice location and rules protecting access to patient records when authorized by the patient.
What should business owners do now?
The article recommends auditing existing agreements, not over-relying on non-competes, using NDAs and non-solicitation agreements where appropriate, thinking through multistate issues, and acting promptly when enforcement is needed.
We work with businesses across a range of industries to draft, audit, and enforce non-compete and confidentiality agreements. If you’d like a review of your current agreements or help building a protection strategy that holds up in court, we’d welcome the conversation.
