Are Noncompete Agreements Enforceable?
Texas companies have the right to protect their investment in workers (within reason)
on February 5, 2018
Updated on May 18, 2022
In short, yes. Although noncompete agreements are not enforceable in all states and in the states where they are, there are Texas State laws limiting their enforceability, you may be asked to sign a noncompete agreement in Texas and if you violate or challenge the terms of the agreement, the court may uphold it.
Noncompete agreements, also known as noncompetition agreements, are meant to protect a company’s legitimate business interest investment in its workers as well as its current position in its market by prohibiting workers from starting new business ventures that will compete with the employer or working with one of the company’s established competitors and sharing confidential business information.
What is a Noncompete Agreement?
A noncompete agreement is a way an employer keeps itself competitive by protecting trade secrets and its investment in talented, specialized workers. Generally, they limit employees’ career choices after they leave the employer in the following ways:
The period of time the employee must avoid working for a competitor. A worker cannot be barred from working for a competitor for the rest of his or her life, but he or she may be prohibited from working for one for a year or two after leaving the original company;
Geographic scope. An employer can only prohibit a former employee from working in a geographic area with an immediate competitor. For example, an employer in Corpus Christi may have a very difficult time justifying prohibiting a former employer from finding work in Dallas; and
The definition of a competitor. An employer must be specific about what types of business constitute a competitor. An employer may list a few specific companies or state plainly which types of operation are considered to be competition in an employment agreement.
Mark Oberti, an employment attorney at Oberti Sullivan in Houston, says that most sales teams have employment contracts and that, in Texas, energy industry employees have seen an increase in noncompete agreements over the past 15 years.
Determine if your Noncompete Agreement is Fair
Although Texas courts uphold the enforceability of non-compete agreements, they may only do so if the agreements do not infringe on the employees’ rights to seek and maintain productive employment in their fields. In other words, if your noncompete agreement has restrictive covenants, you may challenge it on the grounds that it is not fair. The court must consider whether an agreement was too restrictive and whether the employer had a good reason to impose such an agreement. Generally, noncompete agreements are reserved for workers whose specialized skills give a company an advantage over its competitors. Asking a programmer with knowledge of industry software to sign a noncompete agreement may be deemed justifiable, whereas asking a restaurant server to sign one often is not.
“Employers have gotten the memo that it’s actually not that hard to have an enforceable noncompete clause in Texas,” Oberti says. “But, for a regular salesperson, most of the time the noncompete can say, ‘For a year or two, you can’t solicit customers you personally dealt with.’ It can’t say, ‘You can’t solicit any of the company’s customers, whether you dealt with them or not—or any of the potential customers.’ You’ll see agreements that use that sort of language. For the most part, if it’s a regular frontline salesperson, the courts will say that’s broad.”
It is much easier to alter an unfair agreement to make it fair than it is to sign, then challenge, an unfair agreement. If you are asked to sign a noncompete agreement, bring it to an experienced employment lawyer to discuss its terms and determine if it can be revised to be more favorable to you. You do not know what your career’s future holds, so do not sign a contract that unfairly restricts it.
For more information about this area, see our overview on employment law for employers.