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Executive Non-Compete Agreements: What Employers and Executives Should Consider Prior to Signing

Establishing carefully crafted agreements at the onset of an employment relationship is critical to protecting a company, the information, and the clientele that make it unique. Among these agreements are non-competes, also called covenants not to compete – often used for those in the front line of a company, such as executives, who have access to trade secrets and other important company information.

At Hendershot Cowart P.C., we understand the needs of both executives and employers, and leverage our insight and litigation experience to effectively draft, review, negotiate, and enforce non-compete agreements, and defend against claims than a non-compete agreement was violated.

Drafting an Enforceable Non-Compete Agreement:

Non-compete agreements must be carefully crafted. If a lawsuit is filed, courts will closely scrutinize the terms to ensure they are not overly burdensome to an individual and her or his professional future.

To be enforceable in Texas, a non-compete agreement must include the following elements:

  • Be necessary to protect an employer’s legitimate business interests (examples include business goodwill, trade secrets, and other confidential or proprietary information)
  • Be reasonable in time and scope
  • Be reasonable in geographic area
  • Be reasonable in scope of prohibited activities

Since the enforceability of each non-compete is reviewed on a case-by-case basis, it is beneficial to consult with an experienced contract law attorney to gain specific advice for your industry, business model, and competitive environment.

Special Requirements for Physician Non-Compete Agreements:

In addition to the requirements set forth above, there are special requirements for physician non-compete agreements:

  • 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.

These special rules also make it more difficult to enforce the agreement against doctors.

What Should Employers Include in a Non-Compete Agreement?

Companies often expose employees to confidential information during the course of their job; this is especially true for high-level managers and executives. Detailed terms and provisions (which are also reasonable in scope and duration) are critical to establishing what constitutes a violation and which remedies are available to enforce such agreements should issues arise.

Non-compete agreements may address a range of prohibited activities and provisions, including:

  • Employment with competitors
  • Investment and ownership stakes with competitors
  • Confidentiality provisions regarding theft of trade secrets
  • Non-solicitation and non-dealing provisions that prevent servicing customers with whom executives have worked with in the past
  • Non-poaching provisions that prevent recruitment of an executive’s former colleagues.

We understand the concerns employers may have when it comes to balancing the needs of attracting top executive-level talent and protecting critical company information. Companies that create excessively broad non-competes, or include unreasonable provisions, can lose out on valuable executives, which is why it is essential for employers to devise these agreements with the assistance of a business attorney who has a deep understanding of executive relations and concerns, and who is able to negotiate equitable terms.

What Should Executives Consider Prior to Signing a Non-Compete Agreement?

Executives often have greater leverage in negotiating their terms than other employees due to their position and value to a company. Because they also impact one’s professional options in the future, executives should work with attorneys to thoroughly review the terms and conditions, and negotiate modifications when necessary. From the viewpoint of a senior executive, preserving future and post-employment opportunities are of the greatest concern.

We help executives review their non-compete agreements with a focus on how the agreement may impact professional options in the future or create exposure to future limitations or violations. Our business legal team has decades of experience facilitating these mutually agreeable negotiations and modifications of executive non-compete agreements.

Our Houston Non-Compete Agreement Attorneys Can Help

Non-compete agreements are commonplace during matters of executive recruitment and employment, but they are complicated by the inherent tension between the objectives of companies seeking to protect confidential information and executives who want to maximize their opportunities.

Whether you are an executive, licensed professional, or a employer, our legal team at Hendershot Cowart P.C. is available to help with drafting, review, negotiation, enforcement, and defense of non-compete agreements and other contractual matters. Contact us to request an initial consultation.

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