How Non-Competes Work in Texas
What is a Non-Compete?
A non-competition agreement is a restriction on an employee’s ability to work in their particular field. These agreements are primarily utilized by employers to protect their goodwill and confidential information. Employers can face a disadvantage in having an employee separate from their company with specific insider knowledge that they may use to compete against them in the marketplace, so non-compete agreements can be used by employers in turn to prevent former employees from working for their competitors or starting their own business within the same field.
Is a non-compete legal in Texas?
A non-compete agreement may exist as its own document or it may be a clause that’s part of a larger employment agreement. Under Texas law, a covenant not to compete is only enforceable if it is ancillary to or part of an otherwise enforceable agreement and it contains reasonable limitations regarding time, geographical area, and scope of activity. Unlike a handful of other states where non-compete agreements have few restrictions or are outright prohibited, Texas is fairly permissive on the enforcement of these agreements. Public policy according to Texas courts has generally been to promote competition instead of limiting it. However, an employer will have an easier time demonstrating that enforcement of its non-compete agreement is reasonable if the knowledge required for the job position in question is specialized is some way, rather than being more general in nature.
Additionally, an employee must receive adequate or sufficient consideration in order for a non-compete agreement to be enforceable under Texas law. A promise of employment may generally constitute such consideration here. Consideration for already-hired employees can also take the form of a pay raise, promotion, stock options, specialized training, and knowledge of the employer’s confidential information or trade secrets. Reasonableness of a non-compete agreement’s duration, geography, and scope of activity depends on the specific circumstances at play.
What happens if you break a non-compete in Texas?
If a covenant not to compete is violated, a court may award the employer monetary damages and/or injunctive relief, but it will generally not be able to recover its attorney’s fees. Certain professional occupations, like attorneys or physicians, may be excluded from non-compete agreements or placed under more limited restrictions, even though they are highly-specialized positions.
Can you get out of a non-compete?
It’s fair to say that there aren’t many hard-and-fast rules that govern non-compete agreements in Texas, meaning that factual determinations are key when analyzing these agreements. If a non-compete agreement is deemed to be unreasonable and therefore unenforceable, a Texas court can then modify the agreement to make it legally compliant. With all of these potential complications in mind, employees are best served by reaching out to an experienced employment law attorney like Ross Scalise Employment Lawyers to fully understand their rights.