Non-Compete Agreement Violations

Non-Compete Agreement Violation in Houston

Enforcing and Defending Claims in Non-Compete Agreement Disputes

Businesses depend on non-compete agreements to protect their proprietary information and prevent former employees, vendors, or contractors from using that information to compete against them for a reasonable length of time.

Whether you are a business owner watching in alarm as a former employee or supplier sets up competition against you, or a former employee facing allegations of a breached non-compete agreement, the Houston-based, non-compete litigation attorneys at Hendershot Cowart P.C. can help you. We are seasoned litigators skilled at defending and enforcing non-compete agreements.

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Is a Non-Compete Agreement Enforceable in Texas?

To be enforceable in Texas, a non-compete agreement must be included with another agreement (such as an employment offer), and be in exchange for “consideration” (i.e. something in return, such as specialized training or confidential information).

Additionally, it must stipulate specific limitations and restrictions pertaining to:

  • Scope of activity
  • Duration
  • Geographic area

Courts will only enforce non-compete agreements that are reasonable in terms of geographic limitations, the length of time restrictions will be in place, and the scope of prohibited work and activities. Courts also closely scrutinize non-competes to ensure they are not overly burdensome to an individual and their professional future. They must also be specifically tailored to the specific employee and designed to protect legitimate business interests (i.e. trade secrets, confidential information, and business goodwill).

What Type of Relief or Damages Can I Pursue for Breach of a Non-Compete Agreement?

Employers enforcing a non-compete may seek injunctive relief in the form of prohibiting a former executive or employee from acting in violation of the non-compete agreement letter.

Beyond injunctive relief, you may also pursue various types of compensation to recover damage to your business. These include:

  • Seeking monetary or compensatory damages to regain capital lost from the non-compete violation if the case involves a breach of fiduciary duty, misappropriation of trade secrets, or another contract breach;
  • Seeking punitive damages if the individual violated the non-compete maliciously;
  • Seeking liquidated damages if the contract owner stipulated a cost to violating the non-compete in the initial contract, and;
  • Seeking compensation for court costs and attorney’s fees, if the court rules in favor of the contract owner.

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.

Preparing for Non-Compete Agreement Litigation

If you suspect an employee or former employee is violating their non-compete agreement, you must act quickly. Start by gathering the facts and consulting an attorney to ensure you have legal grounds for your claim.

  • Documents: Make sure you have a copy of every document the employee in question signed. If your employee signed a non-compete agreement in exchange for benefits, gather records of the benefits awarded as well.
  • Witness Interviews: You and your legal team will also need to conduct witness interviews. Coworkers may have witnessed the employee’s violation of the non-compete agreement, and clients and customers can confirm suspected violations. Before asking a customer or client to provide an affidavit, consider how your request may impact the business relationship. Your lawyer can help you balance the interests of your business with the interests of your case.
  • Electronic Evidence: Another way to gather evidence is to search the employee in question’s computer. Often, employers can preserve electronic evidence by determining which files an employee accessed, transferred, printed, or deleted. If you suspect an employee is violating their non-compete agreement, preserve their emails and hard drives immediately, confiscate employer-provided equipment (like work laptops and cell phones), and remove their access to any shared computer systems or drives. These steps can also mitigate the damage of a non-compete violation.
  • Enforceability: Once you have evidence of the violation, you will need to ensure your non-compete agreement is enforceable and review the state laws for enforcement. Your attorney can help you evaluate enforceability under state law.

Remember that litigation should always be the last resort. Try sending a cease-and-desist letter before initiating legal action and weigh the pros and cons of litigation before filing a claim. Preparing ahead of time will help you keep up with the fast pace of non-compete litigation. Start your preparation today with Hendershot Cowart P.C.

Can Texas Courts Void or Modify Non-Compete Agreements?

Enforcing a non-compete agreement is not always an all-or-nothing decision. In Texas, a court has the ability to modify – or even nullify – the non-compete if the court determines that it is not reasonable. The courts are given wide latitude to reform a non-compete if the court believes the scope of activity, duration, or geographic area are too restrictive.

Courts also have the power 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.

How Do I Get Out of a Non-Compete Agreement in Texas?

If you are considering other employment or starting your own enterprise, you may want to seek an end to your agreement with your current or former employer.

To get out of a non-compete agreement in Texas, you will need to demonstrate one (or more) of the following:

  • The contract owner failed to provide or uphold consideration, which may impact the legality of the agreement
  • The contract owner engaged in unethical or unlawful conduct, or has a record of failing to consistently enforce the terms of non-compete agreements
  • The actions you have taken since disengaging with the contract owner have not actually violated the terms of the non-compete
  • The non-compete does not protect a legitimate business interest. Companies often require all of their employees to sign a non-compete. However, if you work in a position that doesn’t involve interacting with trade secrets or other propriety interests (working as a receptionist, for example), you can argue that your non-compete didn’t protect any legitimate interests, and is invalid.
  • The terms of the non-compete (concerning geography, duration, and scope of activity) are unreasonable
  • You never signed a non-compete agreement in the first place

Proving one or more of the above points may help release you from the restrictions of a non-compete agreement. An attorney who specializes in business contracts, like the attorneys at Hendershot Cowart P.C., can review any written agreements you signed and advise you of your options.

Non-Compete Violation Defense Strategies

If you violate the terms of a legally enforceable non-compete agreement, you may face a lawsuit. Fortunately, you will also have the opportunity to defend yourself, and there are many effective defenses to non-compete violations, including:

  • The language in the non-compete agreement does not specifically prohibit the conduct you are engaging in
  • The non-compete agreement is not enforceable, according to state law
  • You left your job due to harassment, discrimination, or illegal activities at the workplace
  • Your employer is not protecting a “legitimate business purpose”
  • The non-compete agreement is unreasonable in terms of time, geography, or activities
  • Your employer has already breached the underlying employment agreement
  • Your employer talked you into signing the non-compete agreement via fraudulent inducement
  • The non-compete agreement is invalid under existing law

Non-compete agreements cannot be used to control or punish current or former employees, and employers can only enforce specific and reasonable non-compete agreements. In addition, a non-compete that promotes monopolies or keeps crucial goods and services from the public may not be enforced.

Whether you want to work for a competitor, start your own business, or otherwise make a career move that is restricted by a non-compete agreement, discuss your rights and legal options with our experienced attorneys beforehand. We can also help you defend yourself from any lawsuit your employer may file.

Additional Non-Compete Considerations for Physicians

Because physician non-compete agreements can impact doctor-patient relationships, Texas law has special requirements above and beyond the elements of an executive non-compete agreement.

Specifically, physician non-competes must allow doctors:

  • Access to a list of patients treated within the year preceding the separation from the practice
  • Reasonable access, upon patient consent, to relevant medical records
  • To provide for patients who need acute care even after the contract or employment has been terminated
  • To buy out of their agreement, if they choose, at a reasonable price, or, upon mutual consent, for a price set by a neutral third party

How Can the Team at Hendershot Cowart Help?

At Hendershot Cowart, we represent both employers and employees in non-compete agreement disputes. When you bring us on-board for your case, we will examine the terms and conditions of the agreement. Then, we will work with you to identify the best path forward whether you are pursuing or defending a non-compete violation claim.

We also work with business owners and executives to draft legally sound and enforceable employment contracts and non-compete agreements. With any non-compete matter, our goal is to empower you with information and the benefit of our years of experience, so you can make the best decision for your business or health care practice.

Request a Consultation to Learn More

At Hendershot Cowart P.C., business law and contractual matters are a cornerstone of our practice. This expertise translates to an efficient and comprehensive resolution to your non-compete agreement dispute. Our award-winning business lawyers are ready to work with you.

To speak with a member of our team about your needs, call us for an initial consultation.

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