Every state has its own rules about the enforceability of non-compete agreements, with many technical requirements, carve outs for certain industries like medical and technology, and various presumptions or public policy-driven rules regarding employers’ ability to limit competition from former employees.
Recently, I’ve been receiving a lot of inquiries from Texas employers or companies that are moving to Texas regarding: (1) whether non-compete agreements are enforceable in Texas? (2) what types of non-compete agreements are enforceable in this state? and (3) when should I enforce my non-compete agreement against a departed employee? Many of these companies already have non-compete agreements with their employees, but are worried about their enforceability in Texas courts.
I have previously written about how to enforce non-compete agreements in Texas, here, here, and here. So, the answer to the first question is a resounding “Yes, non-compete agreements are enforceable in Texas.”
The answer to the second question is that, generally, only non-compete agreements with reasonable geographic, time and scope restrictions are enforceable in Texas.
Assuming a positive answer to the first two questions, the answer to the third question depends on the circumstances of a particular departed employee and the answer to the following questions:
- What position is the employee in at your company? C-Suite? Sales? Another position that gives him or her access to sensitive information within the company?
- What special skills the employee has and what specialized training the employee has received in that position?
- Is the company where the employee is going a competitor of your company?
- What position is the departed employee going to take at his or her new place of employment? Is it the same or similar position to what he or she was doing at your company?
- How likely is it that the employee will use the confidential information he learned while working for you at his new job?
- What activities does your non-compete prohibit the employee from doing?
- For how long? Remember, it must be reasonable.
- What area does it cover? Reasonableness is key.
- Did you provide the right type of consideration for the employee’s promise not to compete?
- Do you have a non-solicit agreement that will protect your company without having to enforce the non-compete agreement?
All of these factors will come into play if you decide to enforce a non-compete agreement in Texas. Additionally, you will need to consider where to file the lawsuit, the evidence that you will need in order to obtain a temporary restraining order against the employee, and a host of procedural and discovery issues that come along with litigating a non-compete case.
Bottom Line: Enforcing non-compete agreements is as much of a business decision as it is a legal one. Having a non-compete agreement that is legally enforceable, allows you to decide whether it makes business sense to enforce it against a particular employee. Without a legally enforceable non-compete agreement, however, the business reasons may not even matter.
Leiza Dolghih is the founder of Dolghih Law Group PLLC. She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at leiza@dlg-legal.com or (214) 531-2403.