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3 key limitations necessary for enforceable non-competes in Texas

On Behalf of | Dec 21, 2023 | Noncompete Agreements

Non-compete agreements have been at the center of multiple policy controversies in recent years. Some organizations, including certain federal agencies, want to ban non-compete agreements. Some states, like California, have already done so.

Texas is among the majority of states that still enforces non-compete agreements in certain scenarios. The rules for non-compete agreements in Texas include requirements that the agreement is part of an enforceable contract and that the worker giving up their right to compete with that employer receives appropriate valuable consideration for making that concession. Additionally, the employer proposing the non-compete agreement needs to include three specific limitations on when the organization can enforce the agreement.

Geographic limitations

The internet age has altered how much proximity factors into competition. Businesses across the world can potentially market to individuals and ship goods to them or connect them with local service providers. However, it would be patently unfair to prohibit someone from competing with a business by taking a job or starting a company anywhere in the country or around the world. Therefore, enforceable non-compete agreements in Texas need to include reasonable geographic restrictions. If a worker relocates outside of that area before taking a competing job elsewhere or starting a competing business, of the employer may not be able to enforce the agreement.

Temporal limitations

If someone works as an engineer, they would not want to give up all opportunities to work in their chosen profession indefinitely. Skilled and educated professionals commit years to developing their skills and professional networks. It would be an unfair imposition to force them to abandon their career in return for accepting a job at a company. Most non-compete agreements are enforceable for a set amount of time, which is usually only a few years.

Scope of activity limitations

Simply working in the same industry does not necessarily mean an employee will directly compete with a former employer. The purpose of a non-compete agreement is to prevent them from competing unfairly, often by leveraging information they learned or relationships they developed in a prior job.

A non-compete agreement needs to include specific details about what kinds of activity could constitute a breach of the agreement.

Businesses that understand the requirement for appropriate limitations can more easily protect themselves against unfair competition from former employees. Seeking legal guidance proactively, therefore, is generally wise.