A non-compete agreement or clause is a legal contract where one party agrees not to engage in competitive activities, such as working for a rival company or starting a competing business, for a specified period and within a defined geographic area after leaving their current employment or business arrangement. These agreements have been in the public eye recently as many states move to restrict their validity, with five states banning non-compete clauses altogether. However, non-compete agreements are valid and enforceable in Texas as long as they meet state law requirements. Here is a guide to non-compete agreements in Texas and possible non-compete loopholes.
Non-Compete Agreements in Texas: The Basics
Under Texas law, a non-compete agreement can be enforceable if it is:
- Accompanied by or part of an otherwise enforceable agreement/contract;
- Supported by valid consideration; and
- Reasonably restrict time, geographic scope, and activities.
When analyzing non-compete agreements in Texas, you must consider several crucial elements to ensure validity and enforceability. This includes whether the business desires to protect a legitimate interest, the non-compete’s scope, and whether proper consideration supports the agreement.
Legitimate Business Interest
Non-compete agreements seek to protect a company’s legitimate business interests. A legitimate business interest typically involves safeguarding trade secrets, confidential information, and client relationships. Texas courts carefully scrutinize whether the employer has a genuine and protectable interest that justifies restricting an employee’s future employment opportunities. The onus is on the employer to demonstrate the necessity of the non-compete in preserving its legitimate business interests.
For a non-compete agreement to be valid in Texas, one party must receive adequate consideration provided by the other party. In other words, the other party should receive something of value in return for agreeing to the restrictions. Examples include initial employment, promotions, specialized training, or other benefits. Consideration can take various forms, and Texas recognizes different types like monetary compensation, stock options, or access to confidential information.
The time, geographic, and activity restrictions are critical in determining a non-compete’s validity. The specified time frame must be reasonable for the nature of the industry and the specific circumstances. In addition, geographic restrictions must be reasonably tied to the areas where the company operates. Overly broad limitations are often not allowed. Finally, non-compete agreements must clearly define prohibited activities.
Frequently Asked Questions
Can I Work for a Competitor if I Signed a Non-Compete?
As long as the agreement does not forbid you from working for the competitor, you will have no problem making the switch. However, a company can prevent you from working for a competitor in Texas if you have signed a valid and enforceable non-compete agreement. Be sure to speak with an experienced attorney to review your non-compete if you have any questions about applicability or validity.
How Does a Company Know if You Violate a Non-Compete Agreement?
The onus is on the company to discover and enforce a non-compete agreement if they find any violations. They may discover this in person, through online research, and even through word of mouth. However, a “non-compete police” does not exist to enforce such agreements.
Are There Jobs That Aren’t Subject to Non-Compete Laws?
Certain professions are exempt from Texas non-compete law or have specific requirements for a valid agreement, including doctors, attorneys, and social workers. Speak with an attorney to determine if your agreement may be subject to additional scrutiny.
How to Get Out of a Non-Compete Agreement
If you want to get out of a non-compete agreement in Texas, several options exist depending on the circumstances. Some potential ways to get out of a non-compete agreement include:
- Negotiation. If the terms of the agreement are too restrictive or create too much of a burden, you can attempt to negotiate a new agreement with the other party if they are amenable.
- Waiver. In some rare situations, a party can petition a Texas court to waive or exempt the non-compete agreement from the employer or a court.
- Challenge validity. You may be able to challenge the enforceability of the non-compete agreement in court and have it invalidated if you believe it is unenforceable or violates Texas law or public policy.
No matter what you choose, ensure you seek assistance and advice from an experienced Texas attorney. They can help advise you on the strengths and weaknesses of your case, possible exploitable loopholes, and the right approach for the best outcome.
If you have any questions about the enforceability or validity of a Texas non-compete clause or agreement, call the team at The Curley Law Firm. With a practice focused on resolving business law matters, contract disputes, and employment issues, we offer years of expertise and dedication to every client. Call us or fill out our online contact form to set up a consultation.