Non Compete Agreement Laws in Texas

The majority of non-compete obligations take effect only after the end of the employee-employer relationship. This can be done by firing the employee or the employee`s decision to leave the company. At the time the employment relationship ends for any reason, employers may remind the employee of his or her continuing obligation to non-compete. The best time to do this is during an exit interview or other conversation about terminating the employment relationship. Employers can then begin to assess whether they should be concerned about possible non-compete obligations. An employer may learn that the employee is working for a direct competitor or plans to open a nearby competitor that would directly violate the non-compete obligation. At present, employers can explain the effects of such actions. If an employee does not choose to leave the company during the exit interview to work for a direct competitor, this omission can also be used in future litigation. Exit interviews are also the best opportunity to ensure that the former employee does not have access to trade secrets, customer lists, other employee data or other proprietary information. While disabling a non-compete code in Texas can be complicated, there are a variety of strategies that employees can use to show that a non-compete clause is unenforceable. Start by identifying the considerations your employer takes to justify the restrictions set out in your non-compete agreement. Texas appreciates smoked chest, live music, and employee mobility. Any non-compete obligation that seeks to unduly restrict the free market will not be enforced or modified by a court to limit more than is appropriate to protect an employer`s commercial interests.

Historically, Texas public policy favoured the promotion of commercial competition and placed the onus on the employer to demonstrate that the non-compete clause was necessary. However, recent decisions of courts of appeal have interpreted legal language broadly to support the enforcement of non-compete obligations. Instead of invalidating an obligation not to compete with broad geographical, temporal or scope constraints, the court generally needs to reform the agreement and revise the provisions according to those appropriate to the circumstances. [35] However, as long as the employer does not indicate which reform of the Covenant would be reasonable and necessary, if any, to protect its goodwill or other commercial interests, the Covenant cannot be reformed. [36] CAVEAT: If a court reviews the agreement to make it appropriate, an employer is limited to injunctive relief (i.e., no damages for breach of the agreement). [37] Since 2006, the Texas Supreme Court has reduced the ability of Texas workers to successfully challenge the validity of non-compete obligations on the basis that an employer failed to provide an employee with valuable consideration for the employee`s post-employment restrictions. Now, it may even be possible for an employer to obtain a valid non-compete clause from key employees by providing them with stock options in exchange for a non-compete clause. The Texas Workforce Commission provides detailed information about non-compete obligations in Texas and how they work.

A non-compete obligation, even if supported by a valid consideration, must also be of reasonable scope. Some non-compete obligations are inappropriate because the notion of restriction, geographical scope or scope of the activity to be restricted is too broad. Finally, employer conduct (p.B, impure hands, or conduct inconsistent with law enforcement) can sometimes provide the employee with a good way to avoid a non-compete obligation. In his concurring opinion in Marsh USA, Judge Willett warned judges not to be “divine when competition becomes unfair competition and when a restriction becomes an unreasonable or unnecessarily restrictive restriction.” Texas law, he said, “does not allow protectionism” and that non-compete obligations cannot protect against “the bruising of ordinary competition.” Prohibitions on asking employees and customers after the end of the employment relationship are usually included in employment contracts. The fundamental question is whether these provisions are subject to the law. Prior to 2011, Texas law was clear that not poaching customer service was subject to the law. In the landmark marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011), the Texas Supreme Court analyzed whether stock options were sufficient or ancillary consideration to a binding agreement. In dicta, the court said: “Agreements that restrict the professional mobility of former employees or restrict their customers and employees of former employers are business restrictions and are subject to the law.” [41] The problem is that no decision has ever ruled that a prohibition on soliciting employees is covered by law. In addition, the Texas Supreme Court decision did not appeal the non-solicitation agreement for workers and made the court`s statement on the restrictions on the trade saying and the lack of precedent.

Our experienced business law lawyers in Southlake will explain non-compete agreements in Texas and how they might affect you. A Texas no-compete or non-compete clause is designed to limit the location and type of work an employee can perform. Not ready to talk to us? No problem. Read on for more information on what makes a non-compete clause enforceable in Texas. The law states: It is easier for an employer to enforce a non-compete obligation if it provides the employee with confidential information or trade secrets, and in return, the employee promises not to disclose the employer`s confidential information or trade secrets and agrees not to perform similar obligations for a competing company in the same geographic area for a reasonable period of time. What does this mean in practice? According to Texas law and jurisprudence, a non-compete obligation must have the following elements to be enforceable: There are other reasons why a non-compete obligation may not be enforceable and allow an employee to avoid its terms – even if it is reasonable and there is reasonable consideration. Here are some examples of why an employee in Texas may opt out of a non-compete code: To protect the goodwill and confidential information of the company, a Texas employer may use a non-compete code. A non-compete obligation is enforceable in Texas if it is supported by valid consideration and is reasonable in terms of time, geographic scope, and activities to be restricted. In general, Texas law disapproves of contracts and agreements that restrict employee mobility. The Texas Free Enterprise and Antitrust Act of 1983 states that “any contract, combination, or conspiracy to restrict trade or commerce is illegal.” Dallas Attorney Barry Hersh reviews non-compete obligations on behalf of individuals on a lump-sum, hourly basis. He also drafts and handles Texas non-compete agreements on behalf of employees and businesses. Barry devotes a significant portion of his practice to advising clients and advocating for non-compete obligations.

If you want to have your Texas Non-Competition Code reviewed, you intend to terminate an employment relationship governed by a non-compete clause, or if you are threatened with a non-compete clause by a former employer, complete the law firm`s online application form. In recent years, Texas courts have expressed support for employers` use of non-compete obligations. The courts have done so by establishing certain enforceability requirements that are implicit in non-compete obligations in certain circumstances. Despite this trend, the Texas Federal Court of Appeals ruled in June 2015 that there was no obligation to maintain the secrecy of information. Pursuant to Section 15.50(a) of the Texas Business and Commerce Code, a duty not to compete is enforceable only if, at the time of entering into the agreement, it is an ancillary agreement or part of an otherwise enforceable agreement, and (2) to the extent that it contains restrictions on the time, geographic area, and scope of the activity to be restricted that are reasonable and do not impose a major restriction; what is necessary to protect the goodwill of the employer. or other commercial interests. .