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Many employers expect their employees to sign a non-compete agreement as a condition of employment. Are these agreements enforceable under Texas law? That depends on whether the terms of the agreement are reasonable or overly restrictive. Texas courts have shown reluctance to enforce agreements that stifle competition or make it difficult for an employee to earn a living. Moreover, federal rules concerning the validity of non-compete clauses may be in flux.
What Is a Non-Compete Agreement?
A non-compete agreement is a contract in which an employee agrees not to work for a competitor of their current employer and not to start a business in competition with their current employer. If an employee signs a non-compete agreement, they are not allowed to quit and take a job with a competing company. They are also not allowed to use whatever training or information they’ve acquired in their current job to go into business for themselves in the same market.
Are Non-Compete Agreements Enforceable?
Currently, non-compete agreements are enforceable in Texas if they meet certain conditions, including:
- The covenant not to compete must be part of or ancillary to an otherwise enforceable agreement. For instance, a non-compete agreement can be part of an otherwise correctly-written employment contract.
- The agreement must include reasonable restrictions on the scope of activity it covers, the geographical area to which it applies, and the time period for which it is effective.
These restrictions prevent employers from creating non-compete agreements that leave employees trapped by preventing them from finding work anywhere else if they want to switch jobs. For instance, a non-compete agreement that tried to ban the employee from working in their career path anywhere in the United States for twenty years would probably not be enforceable.
Non-Compete Agreements in Texas Courts
It is sometimes challenging to get a court in Texas to enforce a non-compete agreement. Texas courts have taken the position that public policy seeks to promote competition, not to suppress it. The court will not enforce a non-compete agreement that unfairly suppresses competition or makes it too hard for an employee to find a new job after leaving their employer.
To convince a court to enforce the agreement, the employer must demonstrate two things:
- That the employer would suffer specific harm if the court didn’t enforce the agreement
- That the agreement doesn’t place an unreasonable burden on the former employee’s ability to work
The Common Calling Doctrine
Under the “common calling doctrine,” a Texas court is more likely to enforce a non-compete agreement if the knowledge needed to perform the job is highly specialized. The court is less likely to enforce the agreement if the job depends on knowledge that is widely available. If you’re seeking to enforce a non-compete agreement, you must show that your former employee has knowledge that isn’t generally available and that it would directly hurt your company for the employee to take this knowledge to a competitor in the same market.
Writing an Enforceable Non-Compete Agreement
Are you a business owner looking to write an enforceable non-compete agreement? Consider the following:
- Include a reasonable geographical limitation that won’t prevent the employee from finding work.
- Include a reasonable time limit after which the agreement will no longer be in force.
- Limit the agreement to a scope of activity that isn’t overly broad.
Even better, get help from an experienced business lawyer who can write an enforceable agreement that protects your business.
Help for Employees
If you’re a Texas worker who’s been asked to sign a non-compete clause, consider consulting with a business lawyer to review the terms and ensure they are reasonable in scope, duration, and geographical area. Do not sign anything until you’ve had an attorney look it over.
If you’re a worker seeking to get out of a non-compete agreement, remember that you may have options. These include negotiating a release or modification with your employer or consulting with an attorney to determine if the clause is enforceable under Texas law.
Contact an Austin, Texas, Business Lawyer Today
If you need help with a non-compete agreement in Austin, Texas, the Kumar Law Firm PLLC can help. Contact us today for an initial consultation with an employment contract lawyer, and let’s discuss your concerns together.