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Are non-compete agreements legal in Texas?

On Behalf of | Jan 20, 2023 | Business Law

If you want to protect your business as fully as possible, you need to think long term and be proactive. This leads many businesses to consider whether they can use a non-compete agreement and how best to enforcement them if they are used and subsequently violated. We hope this post will provide some insight into those issues.

Are non-compete agreements legal in Texas?

Yes. Your business 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 your employ.

Texas’s courts tend to disfavor non-compete agreements. Therefore, when you initiate conversations with your employee about the creation of a non-compete agreement, you need to have enough foresight to determine if the terms that you’re proposing are going to hold up in litigation.

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. For example, you may be able to get a wider restriction in a non-compete agreement if you perform your business over the Internet.

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. With that said, courts typically limit the geographic 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. So, when you’re creating one of these agreements, you need to make sure that you’re not being overly broad, otherwise you may end up without any protection.

What if your non-compete is challenged in court?

If a former employee tries to challenge the non-compete that was agreed to, you need to be prepared with evidence to support a finding that the non-compete is legally valid. How do you do that? You may want to turn to the following evidence:

  • The employee’s work history
  • Information about the employee’s new employer
  • The trade secrets or other business interests that you’re seeking to protect
  • The impact that premature disclosure of your protected interests can cause to your business

You’ll want to be as detailed as possible here, too, ensuring that you carefully consider all implications of the non-compete agreement and how failure to abide by it has impacted your business’s profits, market advantage and goodwill.

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.