Non-Compete Agreement in TX: What You Need to Know
Over 18 percent of workers in the United States are currently under a non-compete agreement. This article will share almost everything an employee needs to know before signing a non-compete.
What is the Non-Compete Law in Texas?
Almost every state in the U.S. takes its stance on non-compete law. Some states accept the non-compete agreement, while some have specific requirements that employers must meet before carrying it out. In addition, several states totally reject the idea of the non-compete clause. The non-compete law in Texas provides that all non-compete agreements must fulfill some conditions to be enforceable in the state.
What is a Non-Compete Agreement?
A non-compete agreement or non-competition or covenant not to compete is a restrictive covenant between an employer and employee, restricting the employee from competing with the employer’s business after leaving the business.
For instance, when a marketing consultant is employed in a company, they would be made to sign a non-compete agreement restricting them from competing with their employer. The document might include such points:
- Exposing the employer’s business secrets.
- Starting a competing business.
- Disclosing sensitive information about the employer to the general public.
- Poaching the employer’s clients or other employees.
- Any other act that directly competes with the employer.
The non-compete agreement controls how much value the employee is taking from their previous employer to the new one. However, this document must be prepared properly to be enforceable. In Texas, the non-compete statute provides some conditions that the employer must keep in mind while drafting the non-compete agreement.
1. The Ancillary requirement
The non-compete agreement must be ancillary to an otherwise enforceable agreement. This means that the company must present a confidentiality agreement that prevents the employee from doing things that are not in favor of the employer.
A sufficient consideration from the employer then backs up this agreement between the employer and the employee. The consideration could be money or any other thing of value.
The non-compete agreement must be reasonable in time, scope and geography. This means that the agreement should not tamper with the employee’s activities, mobility, mental space, etc.
The terms of the agreement should be flexible enough for the employee to be able to adhere to it. If not, the court would step in and reduce the excesses of the agreement and make it reasonable. This way the court prevents mediocrity and watches that an employee’s growth isn’t affected by the agreement.
Are Non-Compete Agreements Enforceable in Texas
In Texas, the non-compete agreement must meet specific requirements to be considered enforceable. As discussed above, it must be prepared in a way that doesn’t prevent employees’ right for professional growth. However, if it is prepared properly, it provides many advantages to the employer:
- Protecting the trade secrets of the business.
- Preserving the value of the business.
- Builds integrity in the employees.
- Controls sensitive information and details of the business.
How to Get Out of a Non-Compete in Texas
An employee should bear in mind that disclosure of any sensitive information of their employer may damage their business. However, if an employee in Texas feels that they have worked hard for the company and have gathered knowledge and skills to start their own business, they can find a way around the non-compete agreement. This can be done if the employee can prove that the non-compete agreement was not enforceable.
An omission of the employer’s signature on the agreement is one thing that can render the non-compete agreement unenforceable. The employee can also prove that the agreement is unreasonable in time, scope and geography. Perhaps, the agreement says that the employee is only permitted to work in a small part of Texas.
The Texas Covenant Not To Compete Act also provides that a non-compete clause will not be enforceable if the employee does not receive adequate consideration for the confidentiality agreement.
Non-Compete and Non-Solicitation Agreements: Difference
While the non-compete agreement covers competition generally in every sense of the word, non-solicitation agreements are specifically designed to ensure that the employee will not work with their employer’s clients after quitting the position in their company.
Most times, an employee would work in a company for a while and become familiar with clients. The non-solicitation agreement prevents this employee from bringing them to their business after leaving their employer.
What Happens When a Non-Compete Agreement is Violated?
An employer can sue the employee for violating the non-compete agreement. The employer can also bring several actions against the employee like:
1. A lawsuit for monetary damages
The employer could file a lawsuit against the employee for losing money or profits due to the violation of the non-compete agreement. The employer can also sue for malicious conduct by the employee.
If the employer can prove the claims, the employee would be asked to compensate the employer for the damages.
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2. Seeking for an injunction by the court against the employee
An injunction by the court is an order to the employee to take a specific action. The court may order the employee to quit working for a competitor in the employer’s interest if it has been proved that the non-compete act was violated.
3. A lawsuit for any other loss
The employer can file a lawsuit against the employee for any other loss encountered due to the employee’s violation. Such losses could be the general performance of the business or loss of clients.
Violating a non-compete agreement is not an offense but a tort and is punishable by paying damages or a court injunction. However, the employee can escape liability by proving that the agreement was not enforceable according to the provisions of the law.
Some employers may try to enforce a non-compete agreement that was unenforceable at the beginning. The employee, in this case, can also raise such a defense, thereby escaping liability.
When various employees are ready to start their business, they get scared because of the non-compete agreement. However, there are simple steps to be prepared for the situation. At first, an employee must examine the non-compete agreement before signing it for validation purposes. And second, contacting a reputable attorney before signing the document for better understanding and guidance is also essential.