Texas Business Owners and Non-Compete Agreements

To protect a company's goodwill, trade secrets, and confidential information, a Texas business owner can use a non-compete agreement. Often, non-compete agreements are drafted to prevent an employee from leaving their job and competing with their former employer for clients or business. In Texas, we know that business thrives when there is free trade and competition, but businesses are still able to take steps to protect their interest from former employees.

Although a non-compete agreement is enforceable in Texas, it cannot place an unreasonable burden on the employee, it must be clearly seen as protecting a legitimate company interest, and the employer must be able to show that not enforcing the agreement would cause harm to the business.

A non-compete agreement in Texas is enforceable if:

1- It is ancillary to or part of an otherwise enforceable agreement;

2- It is supported by valid consideration; and

3- It contains limitations that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the employer as to:

a. Scope (are limitations fairly limited or over-broad?)

b. Time (does the clause seek to limit an ex-employee for a year of for life?)

c. Geography (does the clause apply only in the location the former business is in or a

broader area?)

**There is no hardline rule for these factors, but a court will look at reasonableness of the

restriction.

Just because a non-compete is valid under Texas law does not mean an employer suing to enforce the agreement will automatically prevail. The enforceability of an agreement is subjective, and the employee may have defenses. Non-compete agreements that are overly broad and fail to reasonably protect a business’ interests are more likely to be challenged in court. The facts of each case must be carefully analyzed. Call us if we can help review, revamp, or draft a non-compete agreement for your business.