Business-Minded Legal Solutions

Make sure your non-compete agreements are enforceable

The global health crisis has been tough on many businesses. Your company may be among those who have found the need to downsize your workforce to maintain profitability. When you let an employee go, especially one who has access to sensitive or proprietary information, the concern always exists that the employee will use that information to lure away your clients or compete with your company in other ways.

Requiring the employee to sign a non-compete agreement during the onboarding process is the most common way of dealing with this challenge. But non-compete agreements can be difficult to enforce.

Texas courts have a long history of overturning these agreements for being overly restrictive. Crafting enforceable non-compete agreements can be tricky.

The Texas Free Enterprise and Antitrust Act generally prohibits contracts that restrain trade or commerce. However, there’s an exception for non-compete agreements which are reasonable and meet other requirements. Reasonableness is determined by the courts and decisions in this area can be subjective.

It is essential when putting together a non-compete contract that is thorough enough to protect your company’s interests, but also not so restrictive that a court would find it unenforceable. Agreements with too long a time period for restrictions, or too broad a scope of activities in which the employee cannot engage, are likely to be struck down or reformed to be narrower or shorter. Properly drafted non-compete agreements are enforceable in Texas.

Part the responsibility of running a business includes having to let employees go for various reasons. A properly drafted non-compete agreement executed at the appropriate time can be a valuable tool to protect your company’s hard-earned assets, client pool and proprietary information from being used against you.