The restrictions of a non-compete agreement can have drastic effects on your career. In most cases, it is best to seek advice from an attorney before signing a contract that includes a non-compete clause. Understandably, many of us sign employment contracts that include non-competes without consulting a lawyer, but that doesn’t make for good practice.
You might still have options if you have already signed an employment agreement that includes a non-compete. The state of Texas is generally skeptical of any contracts that infringe on free and open exchange. Non-compete clauses do just that. If a non-compete clause is keeping you from advancing your career, it may be helpful to understand how to get out of a non-compete agreement in Texas.
What Is a Non-compete Agreement?
A non-compete agreement is a contractual agreement that governs an employee’s ability to conduct business within an industry after the employee leaves a company. Usually, the non-compete agreement is a clause within an employment contract. Non-compete clauses must follow a strict set of guidelines in Texas.
The purpose of a non-compete is to allow employers to prevent employees from using trade secrets or company-specific knowledge to compete against the employer. Non-competes often do this by restricting the employee from working with competitors in a specific geographic region for a particular amount of time.
What Happens When a Non-Compete is Broken?
The consequences of breaking a non-compete clause can vary.
In some cases, there are damages specified in the contract itself. These damages must reflect an accurate estimate of the damage the employer suffers from the breach of the non-compete agreement. Even if damages are not specified in the contract, the employer can attempt to get their ex-employee to compensate them for the damage caused by the breach.
Employers can also ask a court for an injunction that prevents the employee from working for a competitor. If the injunction is granted, the employee will have to cease employment with the competitor. If the employee started their own business, they would have to stop doing business in the relevant industry.
Employers often have the option to pursue both remedies simultaneously.
Can I Get Out of a Non-compete Agreement?
Whether you can get out of a non-compete agreement in Texas depends on the specifics of the contract. The Texas Free Enterprise and Antitrust Act of 1983 allows reasonable restrictions on an employee’s ability to compete directly with an employer. However, non-compete agreements must follow strict requirements.
If a non-compete agreement fails to follow the requirements, the courts will likely consider it invalid. An invalid non-compete clause cannot be enforced.
What Makes a Non-compete Agreement Invalid?
Several factors might make a non-compete clause invalid in Texas. Any one of these factors can make a non-compete agreement unenforceable.
The Agreement Is Not Reasonable in Scope
In Texas, non-compete agreements cannot be unreasonably broad in the scope of prohibited activities. For example, a non-compete contract that attempts to prevent a programmer from working in the entire tech industry would be invalid. Even a non-compete that covers a smaller industry might be invalid. For a non-compete to be reasonable in scope, the prohibited activities must be limited to those that could legitimately harm the employer’s business interests.
The Agreement Is Not Reasonable in Geographic Area
The geographic area a non-compete covers must also be reasonable. Courts consider the reasonability of the geographic area in the context of the employer’s legitimate business interests. For the most part, a company that does business only in one town will be unable to prevent an employee from working or starting a business throughout the entire state.
The Agreement Is Not Reasonable in Duration
Non-compete clauses must be in effect for a limited duration in Texas. For key employees, such as executives and those with access to the most critical customers and proprietary information, durations of up to five years might be enforced. However, for most employees, a non-compete with a duration of over two years is likely unenforceable.
The Agreement Is Not Part of a Separate Enforceable Agreement
A non-compete clause must be part of a separate enforceable agreement and accompanied by adequate consideration (payment). Most non-compete agreements in Texas are part of an employment contract. For new employees, a job and a paycheck can be sufficient consideration. The situation is more complicated for current employees who must sign a non-compete. In these cases, additional pay or a promotion could be adequate consideration. If there is no consideration, the non-compete will be invalid.
The Curley Law Firm Can Help
If you need help understanding the limitations of your non-compete agreement, The Curley Law Firm can help. Our client-focused, result-oriented approach drives success for our clients. We represent businesses and individuals in a broad range of litigation and transactional matters. Contact The Curley Law Firm today so we can help you fully understand the limitations of your non-compete agreement.