Many employment agreements contain clauses about non-competition. You may not have noticed or didn’t pay much attention to the clause when you first signed your employment contract. Businesses rely on non-competition clauses to protect proprietary information and prevent former employees or contractors from using it to compete against them.
If you are about to leave your job for a new opportunity or have already left your job and received a threatening letter from your former employer about the non-compete clause, you may ask, What happens if you break a non-compete agreement?
We will discuss the common questions about non-competes, such as: What are non-competes, are non-compete agreements enforceable, what are the consequences of violating a non-compete agreement, and can I get out of a non-compete agreement?
The enforceability of non-compete agreements always depends on the facts of the case. If you violate the terms of the agreement, your employer may seek injunctive relief or monetary, punitive, or compensatory damages.
Discussing the terms of your contract and the specific circumstances of your case with a business or contract attorney can help you determine your best course of action and available defenses.
What Is a Non-Compete Agreement?
A non-compete agreement is typically part of a larger employment contract between an employee and employer. The clause for non-competition prevents the employee from competing against the employer while employed and for a set time after employment has ended.
Employers may face disadvantages if an employee with specific insider knowledge separates from the company. The employee could use that inside or proprietary information to compete against the former employer in the marketplace. Employers use non-compete clauses to prevent employees from working for a competitor or starting a new company in the same field or industry after leaving the employer.
Non-compete agreements also often contain language forbidding the disclosure of proprietary or confidential information to third parties.
Non-compete clauses usually restrict the worker from six months to two years. The employer’s goal is to ensure employees don’t gain knowledge at the company and then immediately take it to a direct competitor.
Since companies are mainly interested in protecting themselves and their financial interests, it is always best to work with a contract attorney to review the terms of your employment contract before you sign. An attorney can help protect your rights during and after you leave your employer.
Are Non-Compete Agreements Enforceable in Texas?
Texas non-compete clauses are legally binding and almost always enforceable. Under Texas law, a non-compete agreement must meet certain conditions to be enforceable. The conditions include:
- The non-compete clause must be part of another enforceable agreement (like your employment contract);
- It must contain a reasonable scope of activity;
- It should be reasonable in the geographic area covered;
- It must have a reasonable duration or period; and
- It must have valid consideration (meaning something of value was provided to the employee).
To determine enforceability, the court will consider whether the agreement is overly broad or restrictive to the employee. The clause should not impose greater restraints than necessary to protect the employer’s or company’s goodwill or business interests.
The employer must prove that not enforcing the provision will harm its business interests. Employees must show how the agreement will unfairly limit their ability to make a living or get a job in their industry.
If the court finds that any elements are broader than necessary to protect the company’s business interests, the court can modify or nullify the agreement.
What Happens If You Violate a Non-Compete Agreement?
If you signed a non-compete and are considering leaving your job to start with a new company, you are likely wondering, What are the consequences of violating a non-compete agreement?
If you violate a non-compete agreement, your employer can take legal action against you and pursue the following remedies:
- Injunctive relief which prohibits the employee from acting in violation of the agreement,
- Monetary or compensatory damages,
- Punitive damages if you violated the agreement maliciously,
- Liquidated damages if there was a stipulated cost in the contract for violating the non-compete, and
- Compensation for court costs and attorney’s fees.
The consequences of violating a non-compete agreement depend on the terms of the agreement and the facts of the case. It is always best to consult an attorney to determine if you violated your non-compete and what consequences you might face.
Can I Get Out of a Non-Compete Agreement?
A few options are available if you already signed a non-compete but want to get out of it. Some of these options include:
- Negotiate with your employer—if you believe the terms are too narrow or restrictive, you can negotiate with the employer to modify the agreement in a way that is more reasonable for you;
- Wait for the agreement to expire—if you are not in a hurry to start your new job that would cause you to violate the agreement, you can wait for the non-compete’s stated duration to expire before you start working for a competitor; or
- Challenge the agreement in court—if you believe the non-compete agreement is unenforceable or the terms are not reasonable, you can challenge it in court.
You may also argue that the non-compete is unenforceable because the employer failed to sign the contract or behaved in a manner that negated the non-compete agreement.
You can also argue that the actions you have taken do not actually violate the non-compete terms or that the non-compete doesn’t protect a legitimate business interest.
Getting out of a non-compete in Texas is challenging. Working with a contract attorney can help you build a strong case and develop strategies to successfully argue that the non-compete is unenforceable.
Protect Your Career—Consult Massingill About Your Non-Compete Agreement
Contact Massingill if you are starting a new job and about to sign a new employment contract or have left a job and your former employer wants to enforce a non-compete agreement against you. We understand the importance of protecting your right to work and make a living.
Our experienced attorneys are familiar with drafting, negotiating, and enforcing contracts and non-compete clauses. We can review your specific contract and circumstances to ensure you sign an agreement that will not disadvantage you later.
Massingill is a small business law firm that can provide each client with one-on-one, individualized attention. We have worked with hundreds of clients to help them navigate contract issues and non-compete agreements.
Our firm has received nearly 200 five-star reviews for our outstanding service. Contact Massingill today to learn how we can help you with your non-compete agreement.
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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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