Non-competes in Employment Agreements May Kick in When Employees Leave Their Employers
Do you have a non-compete clause in your employment contract? If the answer is yes, and you are considering changing jobs, then you should examine your employment contract and understand what your obligations are after your departure. A non-competition clause and other restrictive covenants in employment contracts are quite common in Texas. These provisions generate a substantial amount of litigation in Texas courts.
Do You Have Questions about Non-competes?
If you have questions about your employment contract and your rights under your employment agreement, click here Contact Kilgore & Kilgore to set up a free review of the facts of your situation with an employment lawyer. The lawyers at our firm have an abundance of experience advising employees with respect to non-competition clauses and other restrictive covenants such as a non-disclosure agreement or a non-solicitation clause. Our Dallas employment lawyers litigate many employee claims that arise under these restrictive covenants.
Non-competes Are More Common Today
Employers today are adding non-competes to employment contracts much more frequently than in the past. Years ago, non-competes were typically only included in the employment contracts of top executives such as CEO, CFO, CIO, commissioned sales personnel, managers, and vice presidents. That is no longer the case. Today, companies are adding non-competes to the employment contracts of workers at all levels of the organization.
Texas Enforces Non-competes
Non-competes are enforceable in Texas if they comply with the legal requirements set forth in Section 15.50 of the Texas Business and Commerce Code. Contrary to popular belief, Texas courts often enforce non-competes against former employees.
Does Your Non-compete Protect a Trade Secret?
The first requirement under the statute generally is that the employer must provide the employee certain information that is worth protecting. Typically, the employment contract states that the employer will provide the employee with confidential information or trade secrets during the course of the employee’s employment.
Confidential information and trade secrets might potentially include—under certain circumstances—formulas, processes, methods, techniques, or other information not generally known and that gives the employer a competitive advantage. An employer must take active measures to protect the confidential or secret nature of the information in order for it to be protectable.
The employment contract typically states that the employee, in exchange for receiving the employer’s confidential information or trade secrets, agrees not to compete with the employer after the employment ends. Even if you believe that your employer never provided you with confidential information or trade secrets, your employer may think otherwise.
Does Your Non-compete Contain Reasonable Limitations as to Time, Geographic Area, and Scope?
The second requirement of Section 15.50 is that the non-compete must contain reasonable limitations as to time, geographic area and scope. That is, the time during which the former employee cannot compete must be reasonable. Also, the non-compete must state the specific geographical area in which the former employee cannot compete. Finally, the non-compete must state the scope of activity by the former employee that is prohibited. In addition to being reasonable, these limitations must not impose a greater restraint than is necessary to protect the former employer’s goodwill or other legitimate business interest.
Assuming that the other requirements of Section 15.50 are met, Texas courts sometimes find that non-competes that last for one or two years are enforceable. As for the prohibited geographical area, a court might find that the particular county or city in which the former employer is located is reasonable but that an entire state or the entire United States is overbroad and unreasonable. As for the scope of activity to be restrained, a court is more likely to find that a specific, narrow activity is reasonable as opposed to a broad, general activity. However, each case is fact specific and unique. If a court finds that any of the limitations as to time, geographical area, or scope of activity are unreasonable under the particular circumstances, then the court can reform any of those limitations to make the non-compete enforceable.
Before Giving Notice, Check Your Employment Agreement’s Non-compete Clause
If you are thinking about taking a new job, and you are not sure about any post-employment restrictions in your employment contract, then you should carefully review your employment agreement. Even if you believe that your employer never provided you with confidential information or trade secrets, your employer may think differently. If you receive a demand letter from your former employer regarding your alleged violation of a non-compete or other restrictive covenant such as a non-disclosure agreement or a non-solicitation clause, or if you are served with a lawsuit, then you should consult Kilgore & Kilgore’s non-compete page on the website. Click Here to Connect with Dallas Non-Compete Agreements page. If you wish a review of the details of your non-compete, get started by Clicking Here to contact one of the employment lawyers at Kilgore & Kilgore.