Many employees assume that if they were let go their non-compete agreement automatically becomes null and void. This is not true, however, in a lot of states, and this assumption can turn out to be very costly for an employee. It is much better to plan ahead and make sure that the departure from the former employer is as smooth as possible, and to avoid doing some of the things described above that often trigger a non-compete lawsuit.
While getting out of non-compete restraints is not always possible, some of the most common ways that employees – and employers that want to hire them – can overcome such agreements include the following: (1) lack of consideration; (2) unreasonable restraints; (3) no legitimate business interest, and other defenses.
Are non-compete agreements enforceable if the employee is terminated? The answer depends on which state the employee is in, as each state has its own laws regarding the enforceability of non-compete agreements.
Last week, a federal court in Texas refused to enforce a company’s non-compete agreement against four key employees who started a competing business because the agreement was missing a key term – the end date. The above situation can be avoided through simple practice of: (1) knowing what is in the company non-compete agreements; (2) making sure all the key provisions required by the relevant statutes are included; and (3) periodically updating non-compete agreements so that they are compliant with the relevant state law.
In Part I, I described requirements for non-compete agreements in Texas. In Part II, I describe the common mistakes that employers make when it comes to non-compete agreements.
I will be presenting with Stanley Santire of Santire Law Firm on the The Rise in Trade Secrets and Restrictive Covenants Litigation on January 17th