A non-compete agreement is a contract between an employee and their employer that forbids the employee from working in the same or similar field of another entity. The intention is to protect confidential information from being solicited to competitors. How do you know if your non-compete will be enforceable? You need to determine whether the document is necessary in protecting a legitimate interest. The provision may not simply be to discourage employees from leaving, but rather to ensure the business will not be harmed.
How is a non-compete agreement structured? A non-compete contract typically contains three sections. The non-compete clause prohibits employees from working in the same business as the employer. The non-solicitation clause prohibits employees from obtaining current or past clients, employees, or contractors. The non-disclosure clause prohibits the sharing of classified information or trade secrets.
The first thing any Texas non-compete agreement regarding an employee should accomplish is expressly stating that the company agrees to provide the employee with confidential information. Every party entering this agreement must be documented, with the introductory statement officially acknowledging both the complete name of the business entity and the legal name of the recipient. This is the simplest way to meet the requirement that a Texas noncompete must be “ancillary to an otherwise enforceable agreement.”
The non-compete contract and nondisclosure clauses should contain several statements regarding the limitation the business entity intends to impose on the recipient. Non-competes in Texas are required to be reasonable in time and geographic area with a restricted scope of activity.
The time limit of a restrictive document varies on the nature of the profession. If the non-compete is part of the sale of a business, Texas courts are likely to allow a longer period with an optimal range of three to five years. For a typical employee non-compete agreement, the timeframe should be around one to two years.
The geographic limitation should correspond with the expected area the employee will be working in. For sales employees, this typically means the sales territory of the employee. For higher-level management, the geographic area could be as broad as “the United States”.
In terms of scope of activity, the non-compete contract must be reasonable in the manner it limits an employee. For a sales employee, this may look like the set of customers they had personal contact with or learned confidential information about. For higher-level executives, this may be any client or potential clients they interacted with.
Employers often sue former employees for breach of contract when an employer believes that the employee has violated the non-compete agreement. Our firm comes in to resolve these types of business disputes. If you are an employer and need a non-compete agreement or have any questions about your non-compete agreement, please contact us for an experienced attorney. We welcome you to call us at 713-572-4900.