Non-Compete Agreements in Texas: What Employers and Employees Need to Know

What is a Non-Compete Agreement?

A non-compete agreement is a contract between an employer and an employee in which the employee agrees not to work for a competing company or engage in a similar business for a certain period of time after leaving the employer. Non-compete agreements are often used to protect an employer’s trade secrets, customer relationships, and other proprietary information.

Understanding the Requirements for Enforceable Non-Compete Agreements in Texas

Under Texas law, non-compete agreements must meet certain requirements to be enforceable. First, the agreement must be ancillary to or a part of an otherwise enforceable agreement at the time it is made. This means that the non-compete must be closely related to another agreement, such as an employment contract, that is already legally binding.

Second, the agreement must be enforceable under contract law principles. This means that the non-compete must be supported by consideration, or something of value given in exchange for the promise not to compete. For example, an employer may provide additional compensation or benefits in exchange for an employee’s promise not to compete.

Finally, non-compete agreements must be reasonable in terms of the scope of the restriction, the duration of the restriction, and the geographical area covered by the restriction. If a non-compete is too broad or overly restrictive, it may be deemed unenforceable by a court.

What Happens if an Employee Breaches a Non-Compete Agreement?

If an employee breaches a non-compete agreement, the employer may be able to seek damages from the employee for any harm that resulted from the breach. Depending on the circumstances, the employer may also be able to obtain an injunction to prevent the employee from continuing to compete with the employer. In order to obtain an injunction, the employer must generally demonstrate that it is likely to succeed on the merits of its claim, that it will suffer irreparable harm if the injunction is not granted, that the balance of hardships favors the employer, and that the injunction is in the public interest.

However, it is important to note that non-compete agreements may be subject to certain restrictions or limitations under state law. Some states may not enforce non-compete agreements at all, or may only enforce them if they are reasonable in scope and duration. Therefore, it is important for both employers and employees to be aware of the specific laws and regulations governing non-compete agreements in their state.