Is This Non-Compete Enforceable?

Is this non-compete enforceable?

The enforcement of non-compete agreements depends upon numerous factors. A non-compete will be subject to strict scrutiny by the Courts when an Employer seeks to enforce the non-compete. The agreement must be carefully drafted, and the Employer will need to be prepared to justify the reasons for the non-compete and the restrictions imposed by the non-compete.

As an Employee, you must be very cautious about signing non-competes, as it may potentially prevent you from taking other similar employment within the restricted area.

Since the enforceability of each non-compete is reviewed on a case by case basis, it is beneficial to consult with an attorney who is well skilled and versed in the area of non-competes to gain specific advice about your non-compete. For a non-compete to be enforceable in Texas, it must be "ancillary to or part of an otherwise enforceable agreement." In addition, the non-compete must contain limitations as to the time period that the restrictions will apply, the geographic area to be covered by the non-compete and the scope of activity. Each of these restrictions must be reasonable and not imposed by any greater restraint that is necessary to protect the business interest or "goodwill" of the Employer.

In addition to the requirements set forth about, if the non-compete is for a physician, there are additional requirements that must be included in order for the non-compete to be enforceable. The rules for non-competes make it more difficult to enforce the agreement against doctors. Among the additional requirements, a doctor must be given the ability to buy out of the non-compete, must be given access to certain patient records and must not be prohibited from treating a patient during an acute illness.

In Texas, a Court has the ability to modify or "reform" the non-compete if the Court determines that it is not reasonable. Therefore, the parties must be careful in that it is not an all or nothing decision as to enforceability of some non-competes. The Courts are given wide latitude in reforming a non-compete if the Court believes that such reformation is necessary. Also, Courts have given wide latitude to order a person or entity seeking to enforce the non-compete to pay the other side's legal fees if the Court finds that an Employer knew the non-compete was overly broad and still sought to enforce it.

What if an Employee did not sign a non-compete, can they be stopped from competing by a former Employer?

Sometimes. There are two (2) specific situations when this could happen. An Employee owes a fiduciary duty of loyalty to a former Employer. If the former Employee attempts to take confidential, proprietary or trade secret information such as recruiting customers, then the Employer may be able to bring a suit for breach of these fiduciary duties. Also, a former Employee cannot take and use trade secrets of the former Employer. That being said, Employers are advised to ensure that Employees sign confidentiality agreements and not solely rely upon these common law duties.