Non-Competition Agreements in Texas

Non-competition agreements—commonly known as “non-competes”—are oft-litigated agreements between employers and employees. They are designed to protect a company’s competitive interests while maintaining an employee’s at-will employment rights. Most employees, however, don’t pay attention to their non-compete until they leave their job; worse, a prior employer threatens legal recourse. Whether you are an employee looking to transition from your current job, or an employer looking to maintain your competitive edge, understanding your non-compete may be critical to avoiding costly and unnecessary litigation.

What is a non-compete, and what can it restrict? 

Generally, non-competes prohibit employees from competing with their employer’s business for a certain amount of time after the employee leaves the company. A non-compete can prohibit an employee from engaging in certain activities, including: 

– Employment with a competitor in the same profession, trade, or industry for a certain amount of time within a specific geographic area
– Starting a new company or venture that offers the same products or services
– Recruiting former colleagues to join a new competing business 
– Sharing trade secrets, customer information, or other proprietary information with a new employer

When is a non-compete enforceable?

Under Tex. Bus. & Com. Code § 15.50(a), a non-compete is enforceable if:

– It is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made, such as an employment or non-disclosure agreement; and
– It’s restraints as to time, geographical area, and scope of activity are not greater than necessary to protect the goodwill or other business interest of the employer. 

A non-compete must also be supported by consideration related to an interest worthy of protection, such as providing the employee with the employer’s trade secrets or sensitive financial information. Notably, a raise, bonus, or severance payment likely will not suffice as valid consideration for a non-compete. 

To avoid being deemed unenforceable, employers should structure their non-competes to provide only necessary protections for the company. Notably, the burden of proof lies with the employer to demonstrate the covenant meets the statutory criteria. 

How can an employer enforce a valid non-compete?  

Suppose an employee leaves the company and violates their non-compete. In that case, the employer can initiate legal proceedings and seek relief for the breach of their non-compete. In the short term, the employer can seek a temporary injunction or restraining order to prevent the employee from further violating their non-compete while the lawsuit is ongoing. Because non-compete violations can cause immediate harm to employers, courts often deploy expedited procedures to grant employers temporary relief. Indeed, it may only take the court days or weeks before granting the employer injunctive relief.

In the long term, former employers can also seek damages to compensate for any actual losses or lost profits resulting from the breach. This amount can range from very small to very large, depending on what the employer can prove the damages were in court. 

Employees who want to find a new job or start a business must understand how their non-competes may restrict their future business and employment opportunities. Likewise, employers should ensure they craft enforceable non-competes that will protect their competitive interests. 

If you or someone you know is in need of assistance regarding non-competition agreements, do not hesitate to contact us today for a free consultation.

Griffith Barbee PLLC

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