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 – ideally by an knowledgeable Texas non-compete attorney – 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.
Is This Non-Compete Agreement Enforceable?
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.
Since the enforceability of a non-compete is reviewed on a case-by-case basis, it is beneficial to consult with an attorney who is skilled in the area of non-competes to gain specific advice about your agreement.
In addition to the requirements set forth above, physician non-compete agreements have additional requirements that make them more difficult to enforce. 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.
Can Texas Courts Void or Modify Non-Compete Agreements?
In Texas, a court has the ability to modify or "reform" – or even nullify – the non-compete if the court determines that it is not reasonable. Therefore, the parties must be aware that enforcing a non-compete agreement is not always an all-or-nothing decision. 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.
My Employee Did Not Sign a Non-Compete – Can They Still Be Stopped From Competing Against Me?
There are two specific situations in which an employee may be stopped from competing with his former employer by the courts. First – even in the absence of a written agreement – an employee owes a fiduciary duty of loyalty to his or her employer. If the employee attempts to take confidential, proprietary information or misappropriate trade secrets – such as recruiting customers while employed – then the employer may be able to bring a suit for breach of these fiduciary duties. Second, an employee cannot take and use the trade secrets of a former employer. That said, employers are advised to require that employees sign confidentiality agreements and not solely rely upon these common law duties.