The old saying “ignorance is bliss” may be true in many situations, but not when it comes to non-compete agreements in Texas. Over the years, I have identified five most common misconceptions about such agreements from my discussions with clients, friends, and even other lawyers. It’s time to dispel these common myths once and for all:
Myth #1: Non-compete agreements are not enforceable in Texas. This is absolutely false. In Texas, non-compete agreements are enforceable if they meet certain requirements spelled out in the Texas Covenants Not to Compete Act. Even if they do not meet those requirements, a lot of times, a judge can reform, i.e. rewrite, them to make them more “reasonable” and then enforce them.
Myth #2: Texas is a right to work state, so an employer cannot prevent employees from going to work for a competitor. This is also false. A “right to work state” simply means that employees in Texas cannot be fired for joining unions. It has nothing to do with the enforceability of the non-compete agreements. So, while Texas is a right to work state, that doesn’t mean that the non-competes here are invalid.
Myth #3: An employer threatening to fire an employee if s/he doesn’t sign a non-compete agreement makes such agreement invalid. This is false. Because Texas is an at-will employment state, an employer may change the terms of employment at any time, including adding non-compete restraints to an already-existing employment relationship. Thus, with rare exceptions, employers may force employees to sign non-competes under a threat of termination.
Myth #4: Since an employer never enforced its non-compete agreements, it won’t/can’t enforce it against a particular employee. Again, this is false. Employers typically consider many factors when deciding whether to enforce a non-compete agreement, so while they might decide not to enforce the agreement against one employee, they may be motivated to do so against another employee.
Myth #5: If a non-compete agreement looks/sounds reasonable, there is no way to fight it. This is false. There are many defenses to non-compete agreements, and whether a particular non-compete agreement will hold up in court depends on the specific language of the agreement as well as employee’s job duties, length of employment, access to confidential information and a myriad of other factors.
The bottom line is that employees in Texas cannot afford to ignore non-compete restraints in their agreements and, when in doubt, should seek legal advice to understand the consequences of signing a non-compete agreement, or switching jobs or starting a competing business when subject to a non-compete. Planning ahead is key when it comes to non-compete agreements in this state.
Stay tuned for part II to find out common non-compete agreements myths for employers.
Leiza litigates unfair competition, non-compete and trade secrets lawsuits on behalf of companies and employees, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.
Good points. Myth #2 is definitely out there. I’ve had people who signed non-competes say “but Texas is a right to work state, right?”