88R1262 SGM-D
By: Hinojosa H.B. No. 1043
A BILL TO BE ENTITLED
AN ACT
relating to a prohibition against covenants not to compete for
certain low-wage employees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 15.50(a), Business & Commerce Code, is
amended to read as follows:
(a) Notwithstanding Section 15.05 [of this code], and
subject to any applicable provision of Subsection (b) of this
section, a covenant not to compete is enforceable if it is ancillary
to or part of an otherwise enforceable agreement at the time the
agreement is made to the extent that it contains limitations as to
time, geographical area, and scope of activity to be restrained
that are reasonable and do not impose a greater restraint than is
necessary to protect the goodwill or other business interest of the
promisee, except as provided by Section 15.501.
SECTION 2. Subchapter E, Chapter 15, Business & Commerce
Code, is amended by adding Section 15.501 to read as follows:
Sec. 15.501. PROHIBITION AGAINST COVENANT NOT TO COMPETE
FOR CERTAIN LOW-WAGE EMPLOYEES. (a) In this section:
(1) "Employee" means an individual who is employed by
an employer for compensation.
(2) "Employer" means a person who employs one or more
employees. The term does not include a public employer.
(b) This section applies only to an employee who earns not
more than the greater of:
(1) the federal minimum wage under Section 6, Fair
Labor Standards Act of 1938 (29 U.S.C. Section 206); or
(2) $15 an hour.
(c) An employer may not require an employee to whom this
section applies to enter into a covenant not to compete that
restricts the employee from performing work:
(1) for another employer for a specified period of
time;
(2) in a specified geographical area; or
(3) for another employer similar to the employee's
work for the current employer.
(d) A covenant not to compete described by Subsection (c) is
void and unenforceable.
(e) Section 15.51 does not apply to a covenant not to
compete described by Subsection (c).
SECTION 3. Section 15.52, Business & Commerce Code, is
amended to read as follows:
Sec. 15.52. PREEMPTION OF OTHER LAW. The criteria for
enforceability of a covenant not to compete provided by Sections
[Section] 15.50 and 15.501 [of this code] and the procedures and
remedies in an action to enforce a covenant not to compete provided
by Section 15.51 [of this code] are exclusive and preempt any other
criteria for enforceability of a covenant not to compete or
procedures and remedies in an action to enforce a covenant not to
compete under common law or otherwise.
SECTION 4. The change in law made by this Act applies only
to a covenant entered into on or after the effective date of this
Act. A covenant entered into before the effective date of this Act
is governed by the law in effect at the time the covenant was
entered into, and the former law is continued in effect for that
purpose.
SECTION 5. This Act takes effect September 1, 2023.