A non-compete agreement, also known as a covenant not to compete, is a contract between an employer and an employee (or contractor) where the worker agrees not to compete with the employer during or after employment.
These agreements typically restrict workers from working for or starting a competing business within a particular geographic area and for a specified period after leaving their current job.
Non-competes can be difficult for employees to fight due to the power imbalance with employers, legal complexities, high costs, time and effort required, and the risk of retaliation.
Still, they are increasingly falling out of favor across the US. While they are still allowed in Texas, courts view them with a critical eye. Read on to learn more about what a non-compete agreement is and how much it costs to fight a non-compete in the Lone Star State.
What Does a Non-Compete Agreement Do?
Under Texas law, a non-compete agreement restricts employees from engaging in certain competitive activities after leaving their employment. Employers traditionally used non-compete agreements to protect a company’s trade secrets and other confidential information. To be valid in Texas, a non-compete must meet these requirements:
- Consideration. The employer must provide the employee with some form of consideration in exchange for signing the non-compete agreement. This consideration could be access to confidential information, specialized training, or additional compensation.
- Limited duration. The non-compete agreement must have a limited duration. Texas courts generally consider non-competes with a duration of two years or less to be reasonable, but this can vary depending on the circumstances.
- Reasonable geographic scope. The geographic scope of the non-compete agreement must be reasonable. Texas courts typically look for restrictions limited to where the employer does business or where the employee worked.
- Protectable Interest. A non-compete agreement must protect the employer’s legitimate business interests, such as trade secrets, confidential information, or customer relationships. The restriction must be necessary to protect these interests.
- Fairness. Finally, a non-compete agreement must be fair to both parties. Courts will consider factors such as the employee’s ability to earn a living and the impact of the non-compete agreement on the public interest.
These agreements are usually written favorably to the employer, with restrictions on the employee’s activities that can be broad in scope and duration. Due to this power imbalance, it can be difficult for employees to challenge or negotiate the terms of a non-compete agreement, as employers often make them a condition of employment.
Recent Developments on Non-Compete Agreements
While non-compete provisions are still valid in Texas, recent developments suggest that they are falling out of favor, with several states moving to ban or severely limit their use. For example, California, Oklahoma, Minnesota, and North Dakota have banned non-compete agreements for employees in most circumstances.
Additionally, the Federal Trade Commission (FTC) has announced plans to consider a ban on non-compete agreements at the federal level.
This trend reflects a growing recognition of the potential negative impact of non-compete agreements on employee mobility and innovation, leading to increased scrutiny and regulation of their use at the federal and state levels.
Can You Get Out of a Non-Compete in Texas?
In Texas, non-compete agreements are generally enforceable if they meet the abovementioned criteria. However, there are circumstances in which a non-compete agreement may be deemed unenforceable.
- Lack of consideration. For a non-compete agreement to be enforceable, the employer must provide the employee with consideration, such as access to confidential information, specialized training, or additional compensation. If the employer fails to provide adequate consideration, the non-compete agreement may be deemed unenforceable.
- Unreasonable restrictions. Non-compete agreements must be reasonable in terms of their restrictions, including duration and geographic scope. If a non-compete agreement imposes overly broad or unreasonable restrictions on the employee, it may be deemed unenforceable.
- Violation of public policy. Non-compete agreements that violate public policy may also be unenforceable. For example, a non-compete agreement that prevents an employee from earning a livelihood or working in a particular industry may be unenforceable.
Challenging the enforceability of a non-compete agreement in Texas can be complex, and it is essential to seek legal advice, like the team at Massingill, should you need help with an unreasonable set of restrictions.
How Much Does It Cost to Fight a Non-Compete?
Challenging a non-compete agreement can be costly, and the total expenses can vary depending on several factors.
Legal Costs
Attorney fees are a significant component of the cost of challenging a non-compete agreement. In complex cases, attorneys may need to spend considerable time researching case law, drafting legal documents, and preparing for court appearances, all of which can drive up the cost.
Additionally, other expenses may be incurred during the case, such as filing fees, court costs, and expert witnesses or other professional services. These costs can add up quickly and significantly impact the cost of challenging a non-compete agreement.
Factors Impacting Cost
Cases involving multiple parties or intricate legal issues can require more time and resources, leading to higher costs. Legal costs can also vary depending on the jurisdiction. While Austin isn’t New York City, it’s still a large metropolis with millions of residents and a diverse business and legal community.
In addition, the amount and quality of evidence you have immediate access to can impact the cost of litigation. Your non-compete attorney may need to take several depositions or hire an expert witness, which adds to the overall cost.
Alternative Options for Employees
Litigation isn’t the only option to solve legal issues surrounding non-compete agreements. Alternative dispute resolution methods allow parties to come to a solution outside of the courtroom.
Mediation or arbitration can be cost-effective alternatives to litigation when challenging a non-compete agreement, as such methods typically involve less formal procedures and can result in a quicker resolution. Contact an Austin non-compete attorney as soon as possible to determine the best option for your situation.
Trust the Business Law Attorneys at Massingill
Wrapping your head around how to fight an unreasonable non-compete agreement can be overwhelming, leaving you worried about losing a job or other economic opportunities. However, you don’t have to tackle the problem alone.
The attorneys at Massingill Law have years of experience, a proven track record of success, and the drive to fight for the best outcome possible in your case. Call us today to schedule a consultation, or fill out our online contact form to get started.
Where You Can Find Our Austin, TX Office
Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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