On Jan. 5, 2023, the Federal Trade Commission proposed a rule that would prohibit non-compete agreements in every workplace in the United States and greatly limit their use in business transactions. The proposed rule has us imagining a Texas without non-competes, asking how we got here, and how the FTC’s proposed rule might affect Texas businesses.
History of Non-Competes in Texas
American non-compete jurisprudence dates back over 300 years to a lease agreement in England prohibiting the lessor from working as a baker within a specific jurisdiction for a period of five years. When the lessor breached, Mitchel v. Reynolds made its way to the Court of the Queen’s Bench where the court analyzed centuries of case law dating back to the first guilds, ultimately concluding the restraint was not unlawful because it was reasonably necessary to accomplish the main purpose of the transaction.