Most Texas businesses have one or more employees who have been or are critical to the success of the business. A talented salesman is one example of such an employee; a skilled engineer or designer is another. The departure of any of these employees could easily inflict significant damages on the former employer. In such cases, the employer will want to protect its business by imposing limitations on the departing employee’s ability to find work with a competitor. Such agreements are usually called “non-compete” agreements, and a common question is whether such contracts are enforceable.
The short answer
Texas courts have devised an extended answer to this question, and no short answer exists. However, the elements of enforceability in the case of non-compete agreements may be easily summarized.
- The general rule is that a non-compete agreement is enforceable if it reasonable in limitations on duration, geographical area, and scope of the activity that is limited.
- The agreement must also be part of or ancillary to an otherwise enforceable agreement
- Because Texas favors competition, the person or entity wishing to enforce the non-compete agreement must demonstrate how the activities of the ex-employee would harm the company seeking to enforce the agreement if enforcement were denied.
A non-compete will not be enforced outside of the area of the former employer’s reasonable area of business. The limitation on the activity of the former employer must be reasonable considering the nature of the business and the supposed activities of the former employee. If the former employee accepts a position with a firm that is not active in the same area as the entity seeking enforcement, the agreement will not be enforced.
Whether a non-compete agreement can be enforced usually depends heavily on the circumstances of the individual case. Anyone concerned about the enforcement of a non-compete agreement may benefit by consulting an experienced business attorney.