Real estate agent Dean Abedin

Non-Competition Agreements in Texas: What You Need to Know

If you are a business owner in Texas, you may be familiar with non-competition agreements. These agreements, also known as non-compete clauses or covenants not to compete, are contracts between an employer and employee that restrict the employee’s ability to work for a competitor or start their own competing business. However, in Texas, these agreements are subject to specific rules and regulations that employers must follow to ensure their validity.

What is a Non-Competition Agreement?

A non-competition agreement is a contract that an employer and employee enter into that prohibits the employee from competing with the employer’s business for a specified period of time after the employee leaves the company. Non-competition agreements are often used to protect an employer’s trade secrets, confidential information, and customer relationships. These agreements typically restrict the employee from working for a competing business within a certain geographic area and for a specific length of time.

Are Non-Competition Agreements Enforceable in Texas?

The enforceability of non-competition agreements in Texas is governed by the Texas Business and Commerce Code, which provides that these agreements must be reasonable to be enforceable. To be reasonable, a non-competition agreement must:

1. Be ancillary to an otherwise enforceable agreement.

2. Be limited in time, geography, and scope.

3. Be reasonable in the fair protection of the employer`s goodwill or other business interest.

4. Not impose a greater restraint than is necessary to protect the goodwill or other business interest.

If a non-competition agreement is not reasonable, a court may declare the agreement unenforceable, which means the employee can work for a competitor or start their own competing business without violating their previous employment agreement.

What Constitutes a Valid Non-Competition Agreement?

To ensure that a non-competition agreement is valid and enforceable in Texas, the employer should consider the following factors:

1. The length of time the agreement restricts the employee from working for a competitor.

2. The geographic area the agreement covers.

3. The nature of the employer’s business and the employee’s position.

4. The scope of the agreement, including the types of activities the employee is prohibited from engaging in.

5. The consideration offered in exchange for the employee’s agreement to the non-competition agreement.

It is important for employers to draft non-competition agreements that are reasonable in scope and duration, or else the agreement may be deemed unenforceable in a court of law.

Conclusion

Non-competition agreements are commonly used to protect an employer’s business interests. However, in Texas, these agreements must be reasonable to be enforceable. Employers should consider the length of time, geographic area, nature of their business, scope of the agreement, and consideration offered when drafting non-competition agreements. By following these guidelines, employers can ensure that their non-competition agreements are valid and enforceable in Texas.