When you start a new job or leave an old one, you may be presented with a non-compete agreement. What are non-compete agreements?
Non-compete agreements are contracts between employers and employees that restrict an employee’s ability to work for a competitor or start a competing business for a certain period of time after leaving their current job.
In Texas, non-compete agreements are enforceable, but they must meet certain criteria to be valid.
What Are Non-Compete Agreements?
The purpose of a non-compete agreement is to protect an employer’s legitimate business interests, like trade secrets, confidential information, and customer relationships.
The Texas Business and Commerce Code states that non-compete agreements are enforceable if they are:
- Part of or connected to an otherwise enforceable agreement like an employment agreement;
- Reasonable in scope, time, and geographic area; and
- Do not impose restraints greater than necessary to protect the employer’s interests.
Non-compete agreements typically include provisions that restrict an employee’s ability to work in a specific industry or geographic area for a certain period of time after leaving their current employer.
These agreements may also restrict an employee from soliciting the employer’s clients or customers for a certain period of time.
How Long Do Non-Compete Agreements Last in Texas?
Texas law has no specific time limit for non-compete agreements, but courts have generally found that agreements lasting more than two years are presumptively unreasonable.
However, the reasonableness of the duration of a non-compete agreement will depend on the specific circumstances of the case.
For instance, a court might find a short non-compete agreement unreasonable if it is overly broad in scope or geographic area.
Conversely, longer-duration agreements may be reasonable if narrowly tailored and necessary to protect the employer’s legitimate business interests.
When Are Non-Compete Agreements Enforceable?
Overall, non-compete agreements can be enforceable in Texas, but they must be reasonable and designed to protect the employer’s legitimate business interests.
It’s also worth noting that certain professions are exempt from the Texas non-compete law, including physicians, attorneys, and licensed clinical social workers.
In addition to non-compete agreements, Texas recognizes non-solicitation and confidentiality agreements.
Non-solicitation agreements restrict employees from soliciting the employer’s clients or customers for a certain period of time after leaving the company.
Confidentiality agreements prohibit employees from disclosing the employer’s trade secrets or confidential information.
How Common Are Non-Compete Agreements in Texas?
Non-compete agreements are common in Texas, particularly in certain industries like technology.
According to a survey by the Economic Policy Institute, approximately 28% of private-sector workers in Texas are subject to such agreements.
This is slightly higher than the national average, which is around 18%.
However, in 2019, the Texas Legislature passed a law that restricts the use of non-compete agreements for certain low-wage workers, including employees earning less than $45,000 per year.
Further efforts to restrict the use of non-competes in Texas have not passed the legislature.
How Massingill Can Help You Understand Your Non-Compete
Understanding the steps involved, costs, and timeframe to either agree to or challenge a non-compete can help you make informed decisions about your future.
At Massingill, we are devoted to taking care of your professional and business legal needs.