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A BILL TO BE ENTITLED
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AN ACT
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relating to a prohibition against covenants not to compete for |
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certain low-wage employees. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 15.50(a), Business & Commerce Code, is |
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amended to read as follows: |
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(a) Notwithstanding Section 15.05 [of this code], and |
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subject to any applicable provision of Subsection (b) of this |
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section, a covenant not to compete is enforceable if it is ancillary |
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to or part of an otherwise enforceable agreement at the time the |
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agreement is made to the extent that it contains limitations as to |
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time, geographical area, and scope of activity to be restrained |
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that are reasonable and do not impose a greater restraint than is |
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necessary to protect the goodwill or other business interest of the |
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promisee, except as provided by Section 15.501. |
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SECTION 2. Subchapter E, Chapter 15, Business & Commerce |
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Code, is amended by adding Section 15.501 to read as follows: |
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Sec. 15.501. PROHIBITION AGAINST COVENANT NOT TO COMPETE |
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FOR CERTAIN LOW-WAGE EMPLOYEES. (a) In this section: |
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(1) "Employee" means an individual who is employed by |
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an employer for compensation. |
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(2) "Employer" means a person who employs one or more |
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employees. The term does not include a public employer. |
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(b) This section applies only to an employee who earns not |
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more than the greater of: |
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(1) the federal minimum wage under Section 6, Fair |
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Labor Standards Act of 1938 (29 U.S.C. Section 206); or |
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(2) $15 an hour. |
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(c) An employer may not require an employee to whom this |
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section applies to enter into a covenant not to compete that |
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restricts the employee from performing work: |
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(1) for another employer for a specified period of |
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time; |
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(2) in a specified geographical area; or |
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(3) for another employer similar to the employee's |
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work for the current employer. |
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(d) A covenant not to compete described by Subsection (c) is |
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void and unenforceable. |
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(e) Section 15.51 does not apply to a covenant not to |
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compete described by Subsection (c). |
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SECTION 3. Section 15.52, Business & Commerce Code, is |
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amended to read as follows: |
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Sec. 15.52. PREEMPTION OF OTHER LAW. The criteria for |
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enforceability of a covenant not to compete provided by Sections |
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[Section] 15.50 and 15.501 [of this code] and the procedures and |
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remedies in an action to enforce a covenant not to compete provided |
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by Section 15.51 [of this code] are exclusive and preempt any other |
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criteria for enforceability of a covenant not to compete or |
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procedures and remedies in an action to enforce a covenant not to |
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compete under common law or otherwise. |
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SECTION 4. The change in law made by this Act applies only |
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to a covenant entered into on or after the effective date of this |
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Act. A covenant entered into before the effective date of this Act |
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is governed by the law in effect at the time the covenant was |
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entered into, and the former law is continued in effect for that |
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purpose. |
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SECTION 5. This Act takes effect September 1, 2023. |