How Is the Geographic Scope of a Non-Compete Determined—in Road Miles or “As the Crow Flies”?

Texas Non-Compete Geographic Limitations

Non-competes are legally binding contracts between employers and employees that prohibit employees from working for a competitor or engaging in competitive activities within a certain geographic area, among other restrictions. But how is the geographical scope of a non-compete agreement determined?

On This Page:

• What Is a Reasonable Geographic Scope for a Non-Compete Agreement?
• Defining the Geographic Scope of a Non-Compete Agreement
• Driving Distance or "As the Crow Flies"?
• Understand Your State's Laws & How They Impact the Enforceability of a Non-Compete Agreement

The geographic scope of a non-compete agreement is a critical requirement of an enforceable agreement. Texas courts will not enforce an agreement that fails to define it – and simply defining it isn't enough. The restrictions must also be reasonable in relation to the employer's actual business interests and operations. 

Read more about what makes a non-compete enforceable in Texas.

What is “reasonable”?

To be reasonable, the geographic restrictions should protect the legitimate business interests of the company, while being no greater than what is necessary to provide that protection. For example, a company doing business solely in the Houston area should not try to restrict an employee from competing within the entire state of Texas.

If the geographic scope is overly restrictive, a court may refuse to enforce the non-compete or may modify the scope to make it more reasonable. 

In one Houston case, a chiropractic clinic tried to enforce a 500-mile non-compete against a former employee – a restriction that extended not just across most of Texas but into Louisiana, Arkansas, Mississippi, Oklahoma, and parts of Mexico, despite the fact that the clinic's patients were treated solely in Houston. The court found the restriction plainly unreasonable and, because the agreement had never been reformed before the breach occurred, the employer was also barred from recovering damages.

In a second Houston case, a seller of five grocery stores agreed not to open a competing store within 10 miles of the sold locations. Expert testimony showed that a single 10-mile radius covers more than 330 square miles – roughly half the area of Houston – and that stacking radiuses around all of the purchaser's stores effectively blanketed Houston, Katy, Sugar Land, Pearland, and surrounding cities. Because grocery shoppers typically travel only three to five miles, the court found the restriction broader than necessary to protect the purchaser's interests and reformed it to a three-mile radius around the five stores actually sold.

To define and draft a reasonable geographic restriction within a non-compete agreement, consider the employee’s duties and responsibilities and where these duties will be performed.

For example, an employer might want to restrict competition in the geographic area where it does business or has established – and can document – customer relationships.

If the employee is a sales or service rep for a specific region, you may want to limit the non-compete’s geographical boundaries to that region or sales territory.

If you employ remote employees, make sure the geographic scope applies to the location of their employment activities and not to their remote home office location. Document the duties and data used to define the geographic restriction (such as client locations) in case the agreement ends up in litigation. Consider including a choice-of-law clause if your employees work across state lines, since non-compete agreements are currently governed at the state level and vary from state to state.

Learn more about drafting enforceable non-compete agreements for a remote workforce.

Once a reasonable geographic scope is determined, it must be clearly defined within the language of the non-compete agreement to avoid contract ambiguity.

Some non-compete agreements define the scope of the agreement using existing boundaries such as city limits or county lines. Others may set a radius of miles around a central point, such as a specific job site or the company’s headquarters.

When a dispute hinges on a matter of city blocks or a particular intersection, how the radius or boundaries of a geographical restriction are measured can become critical. No court precedent or guideline defines how miles or radius is measured, so be specific. If you mean road miles, put it in writing. Set a center point for the radius as opposed to asking for an area around a city or county, which does not have an established “center”. Remove ambiguities wherever possible.

While non-competes can provide significant protection for an employer's interests, they must be carefully crafted to be enforceable by law. For now, non-compete agreements fall under the purview of state law, and the extent to which they can be legally enforced will vary from state to state.

Work with the experienced Texas business law attorney at Hendershot Cowart P.C. to develop a non-compete agreement that is both likely to be enforced and protects your legitimate business interests. It is especially vital to consult with an attorney if your Texas-based business crosses state lines or is virtual in nature, as drafting an enforceable non-compete agreement in these instances may be more complex.

Questions about "reasonable" geographic boundaries of a non-compete agreement? Send us a message online to schedule a consultation.