What Is A Non-Compete Agreement?

A non-compete agreement is a way for an employer to limit a former employee from competing against them in the same region, within a certain time period, and the scope of activity. It also limits that employee from starting a company that competes with their former employer.

Who Do You Represent In These Cases?

More often than not we represent former employees that are either managers or senior level executives when they leave to join another company. We do, however, also advise companies regarding these agreements.

What Are The Important Components That Go Into Non-Compete Agreements?

The non-compete agreement should specify the time period for which it is going to apply, the geographic area that is going to apply to, and the scope of activity. Another important piece is that the non-compete agreement should discuss what confidential information was given to the employee, in order to bind the agreement.

When Should A Non-Compete Agreement Be Signed?

Typically, the best time to have an employee enter a non-compete is at the beginning of their employment. Even if you have not given them confidential information. The reason for this is that if you wait, the confidential information that they have received before signing the agreement does not bind the employee to that non-compete agreement. It would only be binding on the employee if they were given additional or new confidential information.

Are These Non-Compete Agreements Enforceable?

They are enforceable in Texas. One of the major issues that we see with non-compete agreements is that employers do not give employees actual confidential information. They believe that it is confidential information, but under the law, there are specific definitions of what actually qualifies as confidential. Often, employers do not meet that criteria, so the information that they provide their employees in order to bind to these agreements are not often confidential in nature. This creates an issue with the consideration that the employer provides the employee. Another common issue is agreements that are not reasonable with respect to either time, geographic area, or the scope of activity.

What Happens If I Try To Compete Despite Being An Employee With A Valid Agreement?

If an employer has tried to get an employee with a Non-Compete Agreement to stop competing without going to court and that has not worked, the employer may then file a lawsuit and ask the court to prevent that employee from working with either a specific employer or working in that area in general. In Texas, there are several different forms of what is called injunctive relief, but the first one (a temporary restraining order) can typically last for up 14 days. After that, there is a more in-depth evidentiary hearing (temporary injunction) where the judge would consider evidence and testimony and the judge would then decide whether the employee would be prohibited from working for a specific employer or in a specific industry throughout the duration of the lawsuit.

Do Non-Compete Agreements Ever Expire?

Typically, time limitations are set out in the non-compete agreement itself. If a non-compete agreement states that after the employment relationship ceases, the non-compete will apply for two years, then that time limitation would apply unless changed by a court.

Can Employers Enforce A Non-Compete Agreement If You Are An At-Will Employee?

Employers can, and often do, enforce Non-Compete Agreements against At-Will employees.

Is A Non-Compete Clause Ever Too Broad Or Unenforceable?

Yes. If a Non-Compete agreement is unenforceable, one option for the court is to reform the agreement. For example, if we have an employee who has only worked within the Houston area, but his former employer has a national presence, and the non-compete is attempting to restrict the former employee from working in that industry within the whole US, then the judge can say, “That is too broad, because this employee never worked outside the limits of Houston, so I am going to restrict it to only be within the Houston area”. A potential risk for an employer in that situation is that if the judge elects not to reform the agreement, the court has another option, which is to rule that the entire agreement is unenforceable.

Can An Employer Recover Legal Fees For Suing An Employee Who Has Violated An Agreement?

Under Texas law, an employer can ask at the conclusion of any breach of contract case that the former employee pay reasonable attorney’s fees and costs. The reverse can be true as well; the employee can ask for the court to award his or her attorney’s fees and costs in certain limited situations.

For more information on Non-Compete Agreement In Texas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (281) 277-3066 today.