This article looks at what non-compete agreements are and whether they are enforceable in Texas.
Non-compete agreements have generated a lot of controversy in recent years. In the past, such agreements were primarily a part of employment contracts for executives or employees with access to trade secrets. Recently, however, even low-level employees have been asked to sign restrictive covenants such as non-compete agreements. While a number of states have either made non-compete agreements illegal or placed severe restrictions on their use, Texas has generally gone in the opposite direction and made non-competes easier to enforce.
Why non-competes are so controversial
A non-compete agreement is a clause in an employment contract that generally prohibits that employee from working for a competing business or setting up their own competing business within a certain timeframe and geographical area. Such agreements are designed to protect the employer from unfair competition. For example, without a non-compete agreement, the CEO of one company could take his or her trade secrets of that company to a competing company offering a higher salary.
Non-compete agreements become controversial, however, when they make it difficult for low-level employees to find employment. As the New York Times reports, one-fifth of all employees have signed a non-compete clause, many of them without knowing it. Those clauses, critics contend, prevent workers from seeking out better employment and end up creating monopolies in local marketplaces.
What the law in Texas says
Because of the controversy surrounding non-compete agreements, a number of states have made them illegal in recent years, including Oklahoma and North Dakota. California also only allows non-competes in exceptional circumstances, a fact that has been credited with helping to foster that state’s technology sector.
In Texas, however, as the Houston Chronicle reports, the law generally disapproves of courts striking down employment contracts. Exceptions do exist, though, and there are rules that non-competes must follow in Texas in order to be upheld by the courts. Key among those requirements is that they be reasonable in scope, such as by not placing overly broad restrictions on where or for how long a former employee is subject to the agreement. Furthermore, a Texas non-compete agreement is much more likely to be upheld by a court if it is being applied to employees who have access to trade secrets or who occupy a senior position at the company.
Business litigation help
Employment disputes are among the leading causes of breach of contract claims and any business involved in such claims needs an experienced business litigation law firm on its side. A law firm that knows what it takes to handle complex breach of contract claims will be in the best position to offer businesses the representation and legal counsel they need to protect their best interests.