Rehmet Bill Voids Noncompetes For Workers Earning $15 An Hour

The text as introduced · 486 words

90R2818 DNC-F

By: Rehmet, Cook of Harris
S.B. No. 251

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 and subject to any

applicable provision of Subsection (b) of this section and Sections

[ Section ] 15.501 and 15.502 , 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.

SECTION 2. Subchapter E, Chapter 15, Business & Commerce

Code, is amended by adding Section 15.502 to read as follows:

Sec. 15.502. 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

15.50 , [ and ] 15.501 , and 15.502 and the procedures and remedies in

an action to enforce a covenant not to compete provided by Section

15.51 are exclusive and preempt other law, including common law.

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, 2027.