Texas 2025 - 89th Regular

Texas House Bill HB4067 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	89R12707 PRL-D
2	2	By: Morales of Harris H.B. No. 4067
3	3
4	4
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to prohibiting covenants not to compete against workers.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Subchapter E, Chapter 15, Business & Commerce
12	12	Code, is amended by adding Sections 15.501, 15.502, and 15.503 to
13	13	read as follows:
14	14	Sec. 15.501. DEFINITIONS. In this subchapter:
15	15	(1) "Business entity" means a partnership,
16	16	corporation, association, limited liability company, or other
17	17	legal entity, or a division or subsidiary of the entity.
18	18	(2) "Covenant not to compete" means a condition of
19	19	employment, including an oral or written contractual term or
20	20	workplace policy, that prohibits a worker from, penalizes a worker
21	21	for, or functions to prevent a worker from:
22	22	(A) seeking or accepting work in the United
23	23	States with a different person to begin after the conclusion of the
24	24	employment that includes the condition; or
25	25	(B) operating a business in the United States
26	26	after the conclusion of the employment that includes the condition.
27	27	(3) "Officer" means a president, vice president,
28	28	secretary, treasurer or principal financial officer, comptroller
29	29	or principal accounting officer, or any individual routinely
30	30	performing corresponding functions with respect to any business
31	31	entity.
32	32	(4) "Policy-making authority" means the authority to
33	33	make policy decisions that control significant aspects of a
34	34	business entity or common enterprise. The term does not include
35	35	authority limited to advising or exerting influence over policy
36	36	decisions or having final authority to make policy decisions for
37	37	only a subsidiary of or affiliate of a common enterprise.
38	38	(5) "Policy-making position":
39	39	(A) includes:
40	40	(i) a business entity's:
41	41	(a) president; or
42	42	(b) chief executive officer or the
43	43	equivalent;
44	44	(ii) any other officer of a business entity
45	45	who has policy-making authority;
46	46	(iii) any individual who has policy-making
47	47	authority for the business entity similar to an officer with
48	48	policy-making authority; or
49	49	(iv) an officer of a subsidiary or
50	50	affiliate of a business entity that is part of a common enterprise
51	51	who has policy-making authority for the common enterprise; and
52	52	(B) does not include an individual who does not
53	53	have policy-making authority over a common enterprise even if the
54	54	individual has policy-making authority over a subsidiary or
55	55	affiliate of a business entity that is part of the common
56	56	enterprise.
57	57	(6) "Preceding year" means:
58	58	(A) the most recent 52-week year;
59	59	(B) the most recent calendar year;
60	60	(C) the most recent fiscal year; or
61	61	(D) the most recent anniversary of hire year.
62	62	(7) "Senior executive" means a worker who:
63	63	(A) was in a policy-making position; and
64	64	(B) received for the employment:
65	65	(i) total annual compensation of at least
66	66	$151,164 in the preceding year;
67	67	(ii) total compensation of at least
68	68	$151,164 when annualized if the worker was employed during only
69	69	part of the preceding year; or
70	70	(iii) total compensation of at least
71	71	$151,164 when annualized in the preceding year before the worker's
72	72	departure if the worker departed from employment before the
73	73	preceding year and is subject to a covenant not to compete.
74	74	(8) "Total annual compensation" means a worker's
75	75	earnings over the preceding year, including salary, commissions,
76	76	nondiscretionary bonuses, and other nondiscretionary compensation
77	77	earned during that one-year period. The term does not include
78	78	board, lodging, or other facilities as described by 29 C.F.R.
79	79	Section 541.606 and does not include payments for medical
80	80	insurance, payments for life insurance, contributions to
81	81	retirement plans, or the cost of other similar benefits.
82	82	(9) "Worker" means an individual who works or who
83	83	previously worked, without regard to whether the individual was
84	84	paid, to the worker's title, or to the worker's status under any
85	85	other state or federal laws, including whether the worker is an
86	86	employee, independent contractor, extern, intern, volunteer,
87	87	apprentice, or sole proprietor who provides a service to a person.
88	88	The term includes an individual who works for a franchisee or
89	89	franchisor, but does not include a franchisee in the context of a
90	90	franchisee-franchisor relationship.
91	91	Sec. 15.502. COVENANTS NOT TO COMPETE AGAINST WORKERS
92	92	PROHIBITED. (a) This subsection applies only to a worker who is
93	93	not a senior executive. A person may not:
94	94	(1) enter into or attempt to enter into a covenant not
95	95	to compete with the worker;
96	96	(2) enforce or attempt to enforce a covenant not to
97	97	compete against the worker; or
98	98	(3) represent that the worker is subject to a covenant
99	99	not to compete.
100	100	(b) This subsection applies only to a senior executive. A
101	101	person may not:
102	102	(1) enter into or attempt to enter into a covenant not
103	103	to compete with the senior executive;
104	104	(2) enforce or attempt to enforce a covenant not to
105	105	compete entered into after September 1, 2025, against a senior
106	106	executive; or
107	107	(3) represent that the senior executive is subject to
108	108	a covenant not to compete, where the covenant not to compete was
109	109	entered into after September 1, 2025.
110	110	(c) A covenant not to compete entered into by a worker in
111	111	violation of this section is void and unenforceable.
112	112	(d) This section does not apply to a covenant not to compete
113	113	that is entered into by a person under a bona fide sale of:
114	114	(1) a business entity;
115	115	(2) the person's ownership interest in a business
116	116	entity; or
117	117	(3) all or substantially all of a business entity's
118	118	operating assets.
119	119	Sec. 15.503. NOTICE REQUIRED. (a) Not later than January
120	120	1, 2026, a person who entered into a covenant not to compete with a
121	121	worker that is void and unenforceable under Section 15.502 shall
122	122	provide clear and conspicuous notice to the worker that the
123	123	worker's covenant not to compete is void and unenforceable.
124	124	(b) The notice required by this section must:
125	125	(1) identify the person who entered into the covenant
126	126	not to compete with the worker; and
127	127	(2) be delivered:
128	128	(A) on paper by hand to the worker;
129	129	(B) by mail at the worker's last known personal
130	130	street address;
131	131	(C) by e-mail at an e-mail address belonging to
132	132	the worker, including the worker's:
133	133	(i) current work e-mail address; or
134	134	(ii) last known personal e-mail address; or
135	135	(D) by text message at a mobile telephone number
136	136	belonging to the worker.
137	137	(c) If a person required to provide notice under this
138	138	section has no record of a worker's street address, e-mail address,
139	139	or mobile telephone number, the person is exempt from the
140	140	requirements of this section with regard to that worker.
141	141	SECTION 2. The following provisions are repealed:
142	142	(1) Sections 15.50, 15.51, and 15.52, Business &
143	143	Commerce Code;
144	144	(2) Section 311.083(i), Health and Safety Code; and
145	145	(3) Sections 1002.061(j), 1044.0605(k), and
146	146	1069.0605(j), Special District Local Laws Code.
147	147	SECTION 3. The changes in law made by this Act apply only to
148	148	a covenant not to compete entered into or renewed on or after the
149	149	effective date of this Act. A covenant not to compete entered into
150	150	or renewed before the effective date of this Act is governed by the
151	151	law in effect on the date the covenant was entered into or renewed,
152	152	and the former law is continued in effect for that purpose.
153	153	SECTION 4. This Act takes effect September 1, 2025.