HB4067 - Relating to prohibiting covenants not to compete against workers.

  89R12707 PRL-D     By: Morales of Harris H.B. No. 4067       A BILL TO BE ENTITLED   AN ACT   relating to prohibiting covenants not to compete against workers.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Subchapter E, Chapter 15, Business & Commerce   Code, is amended by adding Sections 15.501, 15.502, and 15.503 to   read as follows:           Sec. 15.501.  DEFINITIONS. In this subchapter:                 (1)     "Business entity" means a partnership,   corporation, association, limited liability company, or other   legal entity, or a division or subsidiary of the entity.                 (2)     "Covenant not to compete" means a condition of   employment, including an oral or written contractual term or   workplace policy, that prohibits a worker from, penalizes a worker   for, or functions to prevent a worker from:                       (A)     seeking or accepting work in the United   States with a different person to begin after the conclusion of the   employment that includes the condition; or                       (B)     operating a business in the United States   after the conclusion of the employment that includes the condition.                 (3)     "Officer" means a president, vice president,   secretary, treasurer or principal financial officer, comptroller   or principal accounting officer, or any individual routinely   performing corresponding functions with respect to any business   entity.                 (4)     "Policy-making authority" means the authority to   make policy decisions that control significant aspects of a   business entity or common enterprise. The term does not include   authority limited to advising or exerting influence over policy   decisions or having final authority to make policy decisions for   only a subsidiary of or affiliate of a common enterprise.                 (5)  "Policy-making position":                       (A)  includes:                             (i)  a business entity's:                                   (a)  president; or                                   (b)     chief executive officer or the   equivalent;                             (ii)     any other officer of a business entity   who has policy-making authority;                             (iii)     any individual who has policy-making   authority for the business entity similar to an officer with   policy-making authority; or                             (iv)     an officer of a subsidiary or   affiliate of a business entity that is part of a common enterprise   who has policy-making authority for the common enterprise; and                       (B)     does not include an individual who does not   have policy-making authority over a common enterprise even if the   individual has policy-making authority over a subsidiary or   affiliate of a business entity that is part of the common   enterprise.                 (6)  "Preceding year" means:                       (A)  the most recent 52-week year;                       (B)  the most recent calendar year;                       (C)  the most recent fiscal year; or                       (D)  the most recent anniversary of hire year.                 (7)  "Senior executive" means a worker who:                       (A)  was in a policy-making position; and                       (B)  received for the employment:                             (i)     total annual compensation of at least   $151,164 in the preceding year;                             (ii)     total compensation of at least   $151,164 when annualized if the worker was employed during only   part of the preceding year; or                             (iii)     total compensation of at least   $151,164 when annualized in the preceding year before the worker's   departure if the worker departed from employment before the   preceding year and is subject to a covenant not to compete.                 (8)     "Total annual compensation" means a worker's   earnings over the preceding year, including salary, commissions,   nondiscretionary bonuses, and other nondiscretionary compensation   earned during that one-year period. The term does not include   board, lodging, or other facilities as described by 29 C.F.R.   Section 541.606 and does not include payments for medical   insurance, payments for life insurance, contributions to   retirement plans, or the cost of other similar benefits.                 (9)     "Worker" means an individual who works or who   previously worked, without regard to whether the individual was   paid, to the worker's title, or to the worker's status under any   other state or federal laws, including whether the worker is an   employee, independent contractor, extern, intern, volunteer,   apprentice, or sole proprietor who provides a service to a person.   The term includes an individual who works for a franchisee or   franchisor, but does not include a franchisee in the context of a   franchisee-franchisor relationship.           Sec.   15.502.     COVENANTS NOT TO COMPETE AGAINST WORKERS   PROHIBITED. (a) This subsection applies only to a worker who is   not a senior executive. A person may not:                 (1)     enter into or attempt to enter into a covenant not   to compete with the worker;                 (2)     enforce or attempt to enforce a covenant not to   compete against the worker; or                 (3)     represent that the worker is subject to a covenant   not to compete.           (b)     This subsection applies only to a senior executive. A   person may not:                 (1)     enter into or attempt to enter into a covenant not   to compete with the senior executive;                 (2)     enforce or attempt to enforce a covenant not to   compete entered into after September 1, 2025, against a senior   executive; or                 (3)     represent that the senior executive is subject to   a covenant not to compete, where the covenant not to compete was   entered into after September 1, 2025.           (c)     A covenant not to compete entered into by a worker in   violation of this section is void and unenforceable.           (d)     This section does not apply to a covenant not to compete   that is entered into by a person under a bona fide sale of:                 (1)  a business entity;                 (2)     the person's ownership interest in a business   entity; or                 (3)     all or substantially all of a business entity's   operating assets.           Sec.   15.503.     NOTICE REQUIRED. (a) Not later than January   1, 2026, a person who entered into a covenant not to compete with a   worker that is void and unenforceable under Section 15.502 shall   provide clear and conspicuous notice to the worker that the   worker's covenant not to compete is void and unenforceable.           (b)  The notice required by this section must:                 (1)     identify the person who entered into the covenant   not to compete with the worker; and                 (2)  be delivered:                       (A)  on paper by hand to the worker;                       (B)     by mail at the worker's last known personal   street address;                       (C)     by e-mail at an e-mail address belonging to   the worker, including the worker's:                             (i)  current work e-mail address; or                             (ii)  last known personal e-mail address; or                       (D)     by text message at a mobile telephone number   belonging to the worker.           (c)     If a person required to provide notice under this   section has no record of a worker's street address, e-mail address,   or mobile telephone number, the person is exempt from the   requirements of this section with regard to that worker.          SECTION 2.  The following provisions are repealed:                (1)  Sections 15.50, 15.51, and 15.52, Business &   Commerce Code;                (2)  Section 311.083(i), Health and Safety Code; and                (3)  Sections 1002.061(j), 1044.0605(k), and   1069.0605(j), Special District Local Laws Code.          SECTION 3.  The changes in law made by this Act apply only to   a covenant not to compete entered into or renewed on or after the   effective date of this Act. A covenant not to compete entered into   or renewed before the effective date of this Act is governed by the   law in effect on the date the covenant was entered into or renewed,   and the former law is continued in effect for that purpose.          SECTION 4.  This Act takes effect September 1, 2025.