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Are non-compete agreements legal in Texas?

On Behalf of | Jan 20, 2023 | Business Law

Many Texas businesses require employees to sign noncompete agreements. Both parties often have questions about the legalities of these agreements, and when and how these agreements can be enforced if there is an alleged violation. We hope this post will provide some insight into those issues.

Are non-compete agreements legal in Texas?

Yes. Businesses can use non-compete agreements. However, in order for these agreements to be legally valid and enforceable, they have to meet certain criteria. This includes showing that the agreement was tailored in a way that did not restrict the employee any more than necessary to protect the business’s interests and that the agreement was reasonable in geographic and temporal scope. The agreement must also be reasonable in the restrictions that it places on the employee’s actions once they leave the business’s employ.

With that said, Texas courts tend to disfavor non-compete agreements and many do not hold up in litigation for a variety of reasons, such as unreasonable scope, time or restrictions. Just because a non-compete agreement is in place does not mean it will offer businesses the protections they think they will receive, nor does it mean that employees are restricted in the way they think they may be restricted.

What is “reasonable”?

When looking at geographic limitations, a court will consider a few key facts. First, it will consider where the employee worked and had contact with customers and business partners. Then, the court will assess where the business conducted its operations and how it carried out its tasks.

It’s important to remember that the court’s goal here is to determine if the terms of the agreement adequately protect the business’s interests without unnecessarily restricting the employee post-employment. For this reason, courts typically limit the geographic scope to the area where the employee worked rather than where the employer conducted business.

This same sort of analysis applies to temporal and activity-based restrictions that are placed in a non-compete agreement. Overly broad terms related to activity or time restrictions may render an agreement unenforceable.

What if a non-compete is disputed?

For both businesses attempting to enforce a non-compete agreement and employees attempting to challenge alleged non-compete violations, the success of the case will likely hinge on the wording of the agreement and:

  • The employee’s work tasks
  • Tasks performed for the new employer
  • Trade secrets or other business interests that the business seeks to protect
  • The impact that premature disclosure of the business’s protected interests can cause

Are you ready to take legal action?

If you’re dealing with a legal issue related to a non-compete agreement, you need to be prepared to zealously advocate for your position. That might be stressful to think about, but that’s where legal assistance can come into play.

If you want to learn more about what a business litigation advocate can do for you in your situation, you may want to discuss your circumstances with an attorney. While you have a lot of options when it comes to representation, not all legal teams are created equally. That’s why you should do your homework and research the firms that interest you so that you can pick the advocate who is right for you.