Non-compete agreements in Texas remain enforceable despite the new FTC rule. Even with changes in federal and state regulations over the past two years, the proposed federal ban is not in effect.
The FTC Federal Rule Is Not in Effect
The Federal Trade Commission (FTC) attempted to implement a nationwide ban on non-compete agreements in 2024. However, that rule was challenged in the case of Ryan, LLC v. FTC, and was struck down by the U.S. District Court for the Northern District of Texas. The court ruled that the FTC lacked the statutory authority to create such a substantive rule.
After this, the official stopped the legal appeals in the Fifth and Eleventh Circuits and agreed to cancel the rule. This means the nationwide ban is gone and the federal government is no longer defending it. Instead of a full ban, the FTC is now focusing on Section 5 of the FTC Act, which stops unfair business practices.
The agency is now looking at companies that use very broad or “predatory” non-compete agreements. The FTC showed this by taking action against Gateway Services, a big national pet cremation company. The FTC made them remove their non-competes, saying a one-year nationwide ban on hourly workers was unfair.
The nationwide non-compete ban is dead. Now, the FTC is targeting companies using broad, unfair, or ‘predatory’ non-compete agreements.
Texas Statutory Requirements for Enforceability
The Texas Covenants Not to Compete Act works as the primary law governing businesses in our state. To stand up in court, a non-compete agreement must meet three specific criteria:
- Not a Standalone Document: A non-compete can’t exist on its own. It must be part of a larger, valid agreement like an employment contract, confidentiality agreement, or business sale.
- Valid Consideration: The employer must give something valuable in return for the non-compete. This could include giving the employee secret trade information or advanced, job-specific training. Access to current client data may also count if the employer has a real reason to protect it.
- Reasonable Limitations: The agreement must only go as far as needed to protect the business. Most are limited to 1–2 years and only cover the area where the employee worked, applying only to directly competing work.
These rules apply to most Texas workers, but healthcare has its own rules. As of September 2025, a new law limits non-competes for doctors, nurses, and certain healthcare workers to give them more job freedom.
New 2025 Restrictions for Healthcare Workers
If your business is in healthcare, you may need to check your non-compete agreements because Texas law has changed. On September 1, 2025, Senate Bill 1318 took effect, marking the biggest update to Texas non-compete laws in decades.
Texas has long had rules for doctors, but this bill now also protects dentists, nurses, and physician assistants. Any healthcare non-compete made or renewed on or after September 2025 is only valid if it follows these strict rules:
- One-Year Limit: Non-competes cannot last longer than one year after leaving the role.
- Five-Mile Radius: Employers can only stop you from working within five miles of your main practice. This replaces the broad, multi-county bans common in suburban and rural Texas.
- Salary-Based Buyout Cap: Every agreement must include a buyout. SB 1318 sets a clear limit: the buyout cannot exceed the practitioner’s total annual salary at the time of leaving.
- “Good Cause” Void for Physicians: A non-compete is void if a physician is fired without good cause.
To avoid any surprises, the law requires that all these terms be written clearly and not hidden in fine print. After this bill became law, the FTC sent warning letters to many large healthcare systems and staffing agencies. They are watching areas where nurses and doctors are stuck in non-competes, limiting their work.
Status of the Proposed Ban: Texas HB 4067
In early 2025, Texas House Bill 4067 was introduced as a possible ban on non-compete agreements for almost every worker in the state. Under the proposed bill, the only exceptions would be for those deemed as senior executives. They define this as people in policy-making roles who earn over $151,164 annually. The bill is still pending in the legislative process and has not passed into law.
In a business-friendly state like Texas, a broad ban faces many challenges and will likely change a lot before becoming law. Since it hasn’t passed yet, the bill does not affect your business now.
Texas HB 4067 could ban non-competes for nearly all workers, but the bill is still pending and does not affect your business—yet.
Determining if Your Non-Competes are Enforceable
Texas is a reformation state. If a court finds a non-compete too broad—like a 10-year term or worldwide scope—the judge must rewrite it to make it reasonable instead of canceling it. If the agreement is rewritten, the employer cannot make the employee pay attorneys’ fees, even if the new agreement is enforced.
Are your non-compete agreements enforceable? Yes, if they involve trade secrets or specialized training and are reasonable in time, geography, and activity. For healthcare workers, non-competes now have stricter limits: a 1-year term and a 5-mile area as of September 2025.
If you’re concerned about how these new rules and the FTC affect your agreements, the lawyers at Feldman & Feldman can help.