Non-Compete Agreements

Non-compete agreements may be enforceable if correctly drafted.


A non-compete agreement is a contract.  In order for any contract to be valid, there generally must have been the intent to contract and valuable consideration exchanged.  The Texas Non-Compete Act is a law that defines how a non-compete agreement can be created and enforced.  A non-compete agreement must be limited in time, scope, and geography.  One of the most important factors in how a non-compete agreement is enforced is what kind of compensation the employee received in exchange for the agreement.  The more compensation received, the greater the enforceability.

Like most contracts, there can be an issue of unconscionability.  Unconscionability is another way of saying that one party to the contract is so disadvantaged that the contract is not enforceable.  When considering the unconscionability of a non-compete agreement, the circumstances and value exchanged between the parties matters.  While there is no absolute rule, the more value that the employee receives, the less likely the agreement is unconscionable.

Some employers try to backdoor a non-compete agreement in non-disclosure agreements.  Here’s how that works:  employer argues that the information that the employee was provided by Employer 1 is so integral to employee’s professional responsibilities that it is impossible for the employee to not disclose the information by working for Employer 2.  Although this theory is crafty, it seeks to unlawfully limit an employee’s right to work.  The idea is that an employee cannot “unknow” or “unlearn” trade secret information from Employer 1 and is therefore forbidden from working for Employer 2.  Sounds unfair, right?  It is.

Employees in sales, business development, or product development roles are especially vulnerable to non-compete agreements because often times the agreement states something along the lines that the employee will not “divert business away from” employer.  Employers use this language to claim that the very act of being employed by a competitor is diverting business away from the previous employer.

You need a skilled lawyer, experienced in analyzing, enforcing, and defending non-compete agreements before you sign it.  If you have been sued, or if you need to enforce a non-compete agreement, call us now.