If you've accepted a job in another state – or you're an employer trying to hold a former employee to a non-compete agreement after they've relocated – the enforceability question doesn't have a simple answer. It depends on which state's law governs the agreement and whether it is enforceable under that state’s laws.
Here is what Texas employers and employees need to know.
Non-Competes Are Regulated by State Law
A federal attempt to ban non-compete agreements nationwide was struck down by a federal court in 2024. Non-competes remain governed by state law, and the rules vary significantly from state to state. Some states enforce them broadly. Others ban them almost entirely. Texas enforces non-compete agreements – but only when they meet specific requirements for geographic scope, duration, and scope of activity.
What governs your agreement when you or your employer crosses a state line depends on the legal framework courts use to decide which state's law applies.
Which State's Law Governs an Out-of-State Non-Compete?
When a non-compete dispute involves parties or activities in more than one state, the first question a Texas court asks is, which state's law determines enforceability?
Texas courts – and federal courts in Texas hearing non-compete disputes – apply a three-part test to answer this question, weighing:
- Which state has the more significant relationship to the parties and the employment relationship? This often comes down to where the employee actually lives and works – not where the employer is headquartered or incorporated.
- Which state has a materially greater interest in the outcome? This question weighs which state has more at stake in how the non-compete is enforced. States have a stronger interest when their own residents are restricted and when the competitive activity being prohibited occurs within their borders.
- Would applying the chosen state's law violate a fundamental policy of the state with the stronger interest? For example, a state that has passed a law limiting or banning non-competes has made a deliberate policy choice to protect its workers' ability to earn a living and move freely between employers. Allowing another state's more permissive law to govern the dispute would render that choice meaningless – this is what courts are weighing when deciding which state has a materially greater interest in the outcome.
All three conditions must be satisfied to override the parties’ contractual choice of law.
What About Choice of Law Provisions?
A choice-of-law provision is a clause in a contract where both parties agree in advance that if a dispute ever arises, a specific state's laws will govern how the contract is interpreted and enforced.
For example, a Texas employer might include a clause that says "this agreement shall be governed by the laws of the State of Texas." The intent is to create predictability – both sides know going in which state's rules apply, regardless of where either party is located when a dispute arises.
The mere existence of a Texas choice-of-law clause does not guarantee Texas law will apply. A judge in a state with a strong policy against non-competes isn't obligated to set that policy aside simply because a contract says Texas law governs. Courts have overridden choice-of-law clauses, depending on where the work was actually performed and whether public policies are at stake.
What If the Agreement Has No Choice-of-Law Clause?
Without a choice-of-law clause, courts run the same multi-factor analysis described above but based entirely on the factual connections between the parties and the states involved, rather than what the parties agreed to in writing.
When Texas Law Might Apply in a Non-Compete Dispute
If an employment agreement designates another state's law, but the employee’s work is centered in Texas, courts may apply Texas law regardless of the contract.
In one case (McKissock, LLC v. Martin), a Texas employee who lived and worked in Houston was found to have a more significant relationship to Texas, even though her employer's agreement designated Delaware law – the state where the employer was incorporated. Texas had a materially greater interest in the outcome, and applying Delaware law – which allows continued at-will employment as sufficient consideration for a non-compete, while Texas does not – would have violated Texas's fundamental policy on non-compete enforceability.
Similarly, a federal court in Texas applied Texas law over a Pennsylvania choice-of-law clause in a case (Realogy Holdings Corporation v. Jongebloed) where the employer – a provider of continuing education courses for real estate professionals – sought to enforce a nationwide non-compete against a Texas-based instructor after she left to work for a competitor. The employer argued Pennsylvania law should govern. The court disagreed. Even though the employer was headquartered in Pennsylvania, this was found to be insufficient to override the law of the state where the employee actually lived and worked.
When Another State's Law May Apply in a Non-Compete Dispute
The analysis works both ways: When an employee's work is based in a state that has banned non-compete agreements, that state's law may govern – even if the contract designates Texas law.
In one case (Cardoni v. Prosperity Bank), a Texas bank acquired an Oklahoma bank and entered into employment agreements with Oklahoma-based bankers that included Texas choice-of-law clauses and non-compete provisions. A federal appellate court refused to enforce the non-competes under Texas law because the employees performed their work in Oklahoma. Oklahoma had a materially greater interest in protecting its own resident employees, and Oklahoma's statutory ban on most non-compete agreements represents a fundamental state policy. The Texas choice-of-law clause was overridden for the non-compete provisions.
Enforcement Across State Lines
Can you enforce a non-compete against an employee who has relocated to another state? The answer generally depends on two variables:
- Which state the employee moved to; and
- Where the prohibited competitive activity is occurring.
When an employee relocates to a state with stronger anti-non-compete policies after signing, that state's law may override the original choice-of-law clause. Courts apply the same three-part test described above, and where the employee now lives and works carries significant weight.
Relocating to a more restrictive state does not automatically shield an employee from enforcement, however. In Stone Surgical, LLC v. Stryker Corporation, a federal court applied Michigan law over Louisiana law even though the employee worked in Louisiana, finding Michigan's interest in protecting its businesses from unfair competition was not outweighed by Louisiana's interest in protecting its employee.
Even when another state refuses to enforce a non-compete under its own law, that ruling is binding only within its borders. A Texas court can independently evaluate the same agreement for competitive activities occurring outside that state – meaning enforcement can be geographically fragmented across state lines.
What This Means for Texas Employers
If your employees work in Texas, include a Texas law in a choice-of-law clause and make sure your agreement is enforceable under Texas law, including a reasonable geographic restriction that reflects where employees actually work and do business.
Employers who operate across multiple states may want to rely instead on alternative agreements or protections that are more consistently enforceable nationwide:
- Non-solicitation agreements prevent a departing employee from actively recruiting your clients, customers, or colleagues for a defined period. Unlike non-competes, non-solicitation agreements are generally enforceable across a much wider range of states – including some that ban non-competes entirely – because they target specific harmful conduct rather than restricting an employee's ability to work.
- Nondisclosure agreements (NDAs) prevent a departing employee from using or sharing your proprietary data, trade secrets, or confidential business strategies. NDAs carry no geographic or duration limitations tied to where an employee works next, making them a durable protection regardless of which state's law ultimately governs.
- Trade secret protection: Employers who cannot enforce a non-compete may still protect confidential information through the federal Defend Trade Secrets Act (DTSA) and state trade secret laws, such as the Texas Uniform Trade Secrets Act (TUTSA).
For Texas employers looking to enforce a non-compete agreement: If a former employee has relocated and is competing in violation of their agreement, act in Texas courts first. Waiting for litigation to be initiated in the employee's new state – particularly one with restrictive non-compete laws – can put you in a significantly weaker position.
What This Means for Texas Employees
If you are a Texas employee considering a move to another state – or a job offer with an employer based elsewhere – have an attorney review your non-compete agreement and evaluate enforceability under both states’ laws.
A non-compete you signed under Texas law may be unenforceable in your new state, depending on that state's policies. Or it may remain fully enforceable under Texas law for activities that affect Texas business interests, even after you relocate.
If you have questions about whether your non-compete agreement is enforceable across state lines, call (713) 783-3110 or contact us online to speak with a Hendershot Cowart P.C. attorney.