Business-Minded Legal Solutions

Common myths about non-compete agreements

Developing client lists and sales strategies for your business can take years. You trust your employees to help you build your business by using your trusted methods.

An enforceable non-compete covenant can be essential to protecting your business’s secrets. Non-compete provisions can protect your company’s sales and strategies after an employee leaves.

These are some of the truths behind some of the most common myths about non-competes.

Myth: A non-compete that applies nationally or world wide is never enforceable

Non-compete agreements should reflect the competitive threats you face if an employee leaks confidential information and should reasonably relate to the employee’s territory or scope of responsibility while taking into account the state law by which agreement is governed.

When you decide the restricted geographical region your non-compete agreement will cover, think about your personnel or sales staff’s territories and duties, and where your key competitors are. If you have staff who have active contacts over large regions of the country, then a non-compete that covers that area might be reasonable and enforceable. The ability to enforce a broad non-compete varies from state to state, depending on which law applies to the non-compete restrictions.

Myth: You cannot enforce a non-compete agreement in a right-to-work state

The term “right-to-work” is deceiving. Many people believe the term means that employees in a right-to-work state can work wherever they want, and even if they sign a non-compete they can work for a competitor. That interpretation of right-to-work is flat wrong.

Non-compete agreements and an employee’s “right to work” are completely unrelated. Right-to-work laws give employees freedoms to join labor unions. If you are in a right-to-work state, that has no impact on whether a non-compete might be enforceable.

Enforceable non-compete agreements typically allow employees to seek other opportunities while still preserving the employer’s interests. A non-compete governed by Texas law should be rationally tied to protection of the employer’s confidential information, trade secrets or similar information. As you consider what terms to include in a non-compete agreement, consider what information you are trying to protect and what competitors would be interested in.