Picture this: You have just found the perfect executive for your business who will help your company grow to new heights. You are just about to have them sign an employment agreement when you discover they have a non-compete agreement with their former employer. Under that contract, they are prohibited from working for another company in your industry within your state for two years.
Can their former employer really prevent you from making this great hire? And as an employer, how long can you prevent your best employees from going to work for a competitor? How long is a non-compete agreement good for, anyway? In Texas and many other states, non-compete agreements may be legal and enforceable depending on the terms.
The Curley Law team will break down the basics of Texas non-compete agreements to help you understand how long do non-compete agreements last and what to look out for when reviewing or drafting these contracts. We will also provide alternatives to non-compete agreements that can help protect your business when a non-compete may not otherwise be enforceable. If you have any questions, don’t hesitate to contact us today.
What Is a Non-Compete Agreement?
A non-compete agreement is a contract that helps protect a company’s business information and intellectual property. These agreements prevent employees from taking company information to a competitor or using it to start their own businesses. In Texas, non-compete agreements are governed by Chapter 15 of the Texas Business and Commerce Code, which governs and prohibits certain restraints on trade. According to this law, non-compete agreements must be reasonable in scope, geographic area, and duration to be enforceable.
How Long Do Non-Compete Agreements Last?
While there is no specific limit on the duration of a non-compete agreement in Texas, courts generally view agreements longer than two years as unreasonable. However, this is not a hard and fast rule, and the reasonableness of the duration of a non-compete agreement will depend on the specific facts and circumstances of each case. For instance, a Texas non-compete agreement lasting three or more years could be upheld if it restricts a very senior employee with access to top-secret information from performing extremely specialized work within a very narrow geographic area.
What Is a Reasonable Duration for a Texas Non-Compete Agreement?
Overall, the reasonableness of the duration of a non-compete agreement in Texas will depend on various factors, and each case will be evaluated on its own merits. However, in general, a non-compete agreement that is longer than two years is likely to be viewed as unreasonable.
Specialization of Work
One factor that courts will consider when evaluating the reasonableness of the duration of a non-compete agreement is the nature of the business involved. For example, if an employer seeks to enforce a non-compete agreement against a former employee in an extremely technical or specialized field, a court may approve a longer duration, since it may take longer for the employee’s knowledge and expertise to become outdated or obsolete. However, a court would likely reject anything other than an extremely short duration—if anything—for a non-compete for an employee like a factory line worker.
Another factor that courts will consider is the geographic scope of the non-compete agreement. A non-compete agreement that restricts an employee’s ability to work in a small, localized area is likely to be viewed as more reasonable than one that covers a large, multi-state region.
Breadth of Restrictions
In addition, the court will also consider the specific language of the non-compete agreement itself. For example, a non-compete agreement that prohibits an employee from working for any competitor, regardless of the employee’s role or responsibilities, is likely to be viewed as overly broad and, therefore, unenforceable.
Other Tools to Help Employers Protect Business Interests
Non-compete agreements are not the only tool employers can use to protect their business interests. For example, employers can also use non-solicitation agreements, which prohibit employees from soliciting the employer’s customers or clients after they leave the company. Unlike non-compete agreements, non-solicitation agreements are generally viewed as more reasonable and, thus, enforceable.
Another option for employers is to use trade secret laws to protect their confidential information and proprietary technology. Under Texas law, trade secret information is defined as information that derives independent economic value from not being generally known and is subject to reasonable efforts to maintain its secrecy. Employers can seek injunctive relief or damages if the information is disclosed or misused.
How Curley Law Can Help Protect Your Small Business
If you believe a non-compete agreement is hampering your business, the Curley Law Firm can help. Our firm represents businesses and individuals in various transactional and litigation matters. We pride ourselves on our client-focused, results-oriented approach. Contact the Curley Law Firm today, and we can help determine how much challenging a non-compete will cost.