Austin TX Business Law Blog

Thursday, December 22, 2022

Enforceability of Non-Compete Agreements in Texas

A non-compete agreement is a restrictive covenant that is often included in certain employment agreements. The non-compete agreement looks to put restrictions on an employee’s activities once the employment relationship has ended. While non-compete agreements can serve legitimate business interests, many states are highly sensitive to them as they are suspicious of any restriction on a person’s ability to seek gainful employment after a certain employment relationship has ended. As such, in some areas, a non-compete agreement may be found invalid. This is true in Texas. Not all non-compete agreements will found to be legally valid and, thus, would be rendered unenforceable.

Enforceability of Non-Compete Agreements in Texas

When a Texas employer looks to put a non-compete agreement in place, it is usually aimed at preventing an employee from one or more of the following:

  • Soliciting clients of a former employer
  • Hiring employees of the former employer
  • Working in a certain profession, trade, or industry

To be valid in Texas, the restrictions of the non-compete agreement must be reasonably related to protecting a worthy interest of the employer. The restrictions must serve a legitimate business interest. Perhaps most importantly, the non-compete restrictions must be reasonable. This means that any geographical limits and time frame restrictions, as well as specified restrictions on the employee’s activities, must be reasonable.

Determining whether restrictions held within the non-compete agreement are actually reasonable, however, is a complex legal analysis. The determination requires a fact intensive investigation into the circumstances surrounding the agreement as well as a thorough reflection on what business interest the employer is trying to protect through enforcing the agreement. It is a determination that is narrowly tailored to the case at hand and the employee subject to the agreement. One non-compete agreement may be legitimate for one employee and not another. Generally speaking, a court will not look favorably on an agreement with overly broad restrictions.

In most cases, a non-compete agreement will be easier to enforce if its restrictions are narrow. It is also more likely to be enforceable if it relates to something involving confidential information or trade secrets of the employer. For instance, an employee promising to not disclose such confidential information to a competing business in a specified geographic area for a reasonable amount of time is likely to be held up as enforceable.

As long as a non-compete agreement is part of an otherwise enforceable agreement and supported by valid considerations as well as being reasonable in its restrictions, a Texas court is likely to find it enforceable. Employees, however, should be cautious in putting such restrictive covenants in place. Texas, in general, does not look favorably on restrictions placed on employee mobility.

Business Law Attorney

The Kumar Law Firm can help develop a non-compete agreement that is likely to be enforceable and successful at protecting your legitimate business interests. Contact us today.

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