Does a Non-Compete Agreement Apply If You're Fired or Laid Off in Texas?

The short answer is yes – in most cases. Texas law does not distinguish between voluntary and involuntary separations when evaluating whether a non-compete agreement is enforceable. Whether you quit, were fired for cause, or were laid off in a company-wide restructuring, the non-compete you signed generally remains in effect.

That said, several important exceptions and defenses can limit or defeat enforcement depending on how the agreement was drafted and how the termination was handled.

Why Texas Courts Enforce Non-Competes After Termination

Under the Texas Covenants Not to Compete Act, there is no provision that voids a non-compete based on how the employment ended. Texas courts have consistently applied non-competes against employees who were terminated or laid off by their employers. 

This may feel counterintuitive. You were let go – why should your employment opportunities be restricted? 

The legal rationale is that the non-compete is consideration (a promise in exchange for a benefit) for something the employer provided during employment, such as providing confidential information, specialized training, stock options, or access to trade secrets. That consideration was delivered before the employment ended, and the restriction you agreed to in exchange for it does not expire, even if your employer terminated the employment.

When Termination Can Affect Enforceability

While termination or getting laid off doesn't automatically void a non-compete, the specific circumstances around a termination can create viable defenses against enforcement. Here are three situations that may limit your employer’s ability to enforce a non-compete against you.

1. The employer never delivered the consideration they promised

A non-compete must be "ancillary to an otherwise enforceable agreement" – meaning the non-compete must be attached to a separate, valid contract. If the consideration (exchanged benefit) for your non-compete was access to confidential information, specialized training, or trade secrets, and the employer terminated you before delivering any of that, the foundational agreement may never have been completed. 

In one Texas case, Titan Oil & Gas Consultants, LLC v. Willis, a court found a non-compete unenforceable because it amounted to a standalone promise extracted from the employee without anything of value from the employer in return. The employer could not show that the non-compete was part of a real, mutual exchange – where the employee agreed to restrictions in return for something of actual value from the employer. The court found that there was no “otherwise enforceable agreement.” As a result, the non-compete was not enforced.

2. The employer's own conduct caused or justified the termination

Courts have found that an employer's bad faith or breach of the employment agreement can be a defense against non-compete enforcement. Employer misconduct alone doesn't automatically void the agreement, but if an employer engaged in unlawful conduct – discrimination, harassment, wage theft, or other violations – and that conduct led to the end of your employment, you may have a strong defense against enforcement.

3. The agreement's own language carves out your situation

Non-compete agreements sometimes include language stating the agreement would become ineffective if the employee's employment were "terminated, without cause, prior to" a specified date or under certain defined circumstances. These carve-outs are enforceable – courts will honor the language the parties agreed to. Read your agreement carefully for any termination-specific provisions.

What About Physicians and Healthcare Practitioners?

Physicians have a distinct protection that does not apply to other employees. For non-compete agreements entered into or renewed on or after September 1, 2025, a physician non-compete is automatically void and unenforceable if the physician is involuntarily discharged without good cause – defined as a reasonable basis for termination directly related to the physician's conduct, job performance, or employment record. If a physician was terminated for reasons unrelated to their performance, the non-compete may have no legal effect under the new rules.

This protection applies only to physicians and does not extend to nurses, dentists, or physician assistants. However, those practitioners do have separate protections governing the scope and terms of their non-compete agreements.

What To Do If You've Been Fired or Laid Off and Have a Non-Compete

Before making any career move that could implicate your non-compete – joining a competitor, starting a new business, soliciting former clients – have an attorney review the agreement. We can review your agreement and the circumstances of how your employment ended and identify defenses that may not be obvious from the contract language alone.

If you've already received a cease-and-desist letter, do not respond without counsel. How you respond – and whether you respond at all – can either preserve your options or narrow them, and it signals to your former employer how prepared you are to defend yourself.

Our attorneys have represented both employers seeking to enforce non-competes and employees defending against those claims. Call (713) 783-3110 or contact us online to schedule a consultation.