Understanding Non-Compete Agreements in Texas
Non-compete agreements are an increasingly valuable tool for businesses operating in competitive sectors such as technology, healthcare, finance, and professional services. In Texas, however, not all non-compete agreements are enforceable. To safeguard your company’s interests without violating the law, it’s crucial to understand the legal standards that govern these agreements.
In the guide below, we will outline what Texas employers need to know about drafting, enforcing, and defending non-compete agreements.
A Basic Overview of Non-Compete Agreements
A non-compete agreement is a contract that restricts a former employee from engaging in activities that could directly compete with your business after their employment ends. These agreements often prohibit employees from:
- Working for a direct competitor
- Starting a similar business
- Soliciting your clients or employees
The primary purpose of a non-compete agreement is to safeguard your company’s proprietary information, customer relationships, and strategic advantages. However, in Texas, enforceability depends on how the agreement is structured.
Are Non-Compete Agreements Enforceable in Texas?
Yes, but only if they meet specific legal requirements. Under the Texas Business and Commerce Code § 15.50, a non-compete agreement is enforceable if:
- It is part of an otherwise enforceable agreement. In most cases, this means the employee received confidential information, specialized training, or another legitimate benefit as part of their employment.
- The restrictions are reasonable in:
- Time: The duration of the restriction must be appropriate for the industry and role.
- Geographic scope: Limitations should relate to the areas where the company actually does business.
- Scope of activity: The restriction must be narrowly tailored to protect your specific business interests.
Overly broad or vague restrictions are more likely to be overturned or reformed by the courts.
Why Proper Drafting Matters
Texas courts are reluctant to enforce non-compete agreements that appear to be punitive or unnecessarily restrictive. A poorly drafted agreement could lead to costly litigation or complete invalidation. That’s why it’s critical for employers to:
- Avoid generic or boilerplate language
- Clearly define what constitutes “competition”
- Specify reasonable time and geographic boundaries
- Tie the restriction to legitimate business interests, such as protecting trade secrets or goodwill
What If an Employee Violates a Non-Compete?
If a former employee breaches a valid non-compete agreement, your business may be entitled to legal remedies such as:
- Injunctive relief to stop the competitive activity
- Monetary damages for lost profits or harm to your business reputation
- Attorney’s fees if the agreement includes a prevailing-party clause
However, if the agreement is challenged, its enforceability will be scrutinized. Therefore, ensuring compliance with Texas law is crucial before enforcement is required.
Independent Contractors and Non-Competes
Texas courts generally apply the same legal principles to non-compete clauses involving independent contractors. If your business relies on contractors who receive access to sensitive information or client relationships, you may still be able to protect your interests with a properly drafted agreement.
Protect Your Business with a Legally Sound Non-Compete Strategy
Non-compete agreements can play a key role in protecting your business from unfair competition, but only if they are carefully drafted, reasonably limited, and aligned with Texas law.
At Coleman Jackson, P.C., we assist Texas businesses with drafting, reviewing, and enforcing non-compete agreements that hold up in court. Whether you’re implementing new contracts or facing a dispute over an existing one, our legal team can help you safeguard your business interests with confidence.
Contact Us Today
Contact Coleman Jackson, P.C., today to schedule a consultation with our team and learn how we can help your company navigate non-compete agreements in Texas.
This law blog is written by the attorneys at Coleman Jackson, P.C., located at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206, for educational purposes only. It does not create an attorney-client relationship between this law firm and the reader. You should consult with legal counsel in your geographic area regarding any legal issues affecting you, your family, or your business.
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