A non-compete obligation, even if supported by a valid consideration, must also be of reasonable scope. Some non-compete obligations are inappropriate because the notion of restriction, geographical scope or scope of the activity to be restricted is too broad. Do you have any further questions about non-compete obligations? Under Texas` new non-compete obligation, the employee`s non-compete obligation becomes enforceable even if an employer does not provide confidential information or other valid considerations at the time the employee signs a Texas non-compete commitment, if the employer actually provides the information to the employee. These are the most common scenarios with a non-compete obligation. After a few decades of working as a lawyer in this field, I thought it would be nice to have a short resource to scan quickly and have a general idea of “What can we do?” or “How bad is the situation?” Prior to October 2006, many Texas non-compete clauses failed because employers did not meet the first requirement: they did not provide workers with a binding consideration that justified their interest in retraining the employee. Under Texas law, the first question is whether the pact is supported by reasonable consideration to create an enforceable pact. Unlike many other states, an employer in Texas cannot pay for a restrictive agreement (which includes both non-compete clauses and no-show restrictions on customers). In other words, in Texas, an increase, bonus, or severance package is usually not a sufficient consideration to support a restrictive agreement. Some thought Texas might move in the direction of allowing sufficient return payments when the Texas Supreme Court issued its 2011 decision in Marsh USA Inc. v. Cook. However, the following cases did not bring Texas law closer to making pure payments in exchange for restrictive agreements. You get an exciting new job offer; You are ready to sign on the dotted line, but your contract includes a non-compete clause.
They ask: Is it even legal? What happens if this work doesn`t work? Could I find another job? Can this be applied? Under Texas law, the answer is yes, perhaps, and as long as it`s reasonable. If you have any questions about non-compete obligations, contact the author of this article, lawyer Abbey Cohen or someone else on the Nachawati team. Typically, if a non-compete obligation is found to be inappropriate, a Texas court may amend or modify the non-compete obligation to make it appropriate. In this case, the employer does not receive compensation based on pre-Reform conduct. In addition, the court would have the power to order the employer to pay the employee`s legal fees if it finds that the employer knew that the non-compete obligation was too broad. Each article deals with some of the “most important statistics” of a non-compete obligation: considerations, restrictions (geography, time, scope), specific laws (e.g. .B. doctors) and interaction with cousins of a non-compete obligation – poaching of employees and poaching of customers.
There are other reasons why a non-compete obligation may not be enforceable – allowing an employee to avoid its terms – even if it is reasonable and there is reasonable consideration. Here are some examples of why an employee in Texas may be able to opt out of a non-compete code: In terms of geographic scope, non-compete obligations are more likely to be enforced if they don`t restrict an employee beyond the areas in which they have worked. For example, if the employer exclusively sells products in the Dallas area, it will be difficult to justify a non-compete clause that includes Austin, San Antonio and Houston. On the other hand, if the employee is in a position that involves software development, an employer may be able to justify a restriction that goes beyond the company`s immediate scope of activity if there is a risk that a competitor will start marketing products within the company. In general, a non-compete obligation that does not contain a geographical restriction could render the agreement inappropriate and unenforceable. In terms of duration, unlimited restrictions of competition are undoubtedly inapplicable. However, it is not really reasonable to describe a fixed and expeditious rule for the number of months or years for which a court considers a reasonable duration for non-compete obligations. Of course, it depends on the industry in which the company is located, the role of the employee in the company, the market in which the company operates and a variety of other factors.
In general, courts are often skeptical of non-compete obligations that last more than a year. However, in inappropriate cases, Texas courts have enforced non-compete obligations for two years or more. Non-compete obligations do not necessarily have to determine duration, but the courts will only apply these agreements for a period of time that is reasonable in the circumstances. Again, there are no clear rules, and the standard is factually binding. The ultimate question in terms of duration is: how long does it take to protect the legitimate interests of the employer? In Texas, a non-compete clause is enforceable when it is: In recent years, Texas courts have expressed support for employers` use of non-compete obligations. The courts have done so by establishing certain enforceability requirements that are implicit in non-compete obligations in certain circumstances. Despite this trend, the Texas Federal Court of Appeals ruled in June 2015 that there was no obligation to maintain the secrecy of information. Now let`s talk wisely about the “reasonable standard.” Ultimately, the definition of “reasonable” in relation to the non-compete obligation (and almost all other areas of law) depends on the facts and circumstances and can vary from case to case.
Not ready to talk to us? No problem. Read on for more information on what makes a non-compete clause enforceable in Texas. In his concurring opinion in Marsh USA, Judge Willett warned judges not to be “divine when competition becomes unfair competition and when a restriction becomes an unreasonable or unnecessarily restrictive restriction.” Texas law, he said, “does not allow protectionism” and that non-compete obligations cannot protect against “the bruising of ordinary competition.” In this conclusion, the Texas Supreme Court concluded that “the Texas Constitution protects freedom of contract.” However, the court also reaffirmed the legal restrictions imposed on the non-compete obligation. The tribunal found that “unreasonable restrictions” could impede legitimate competition. These restrictions mean that a Texas court considers what a reasonable person would do in these situations. For example, if a company tries to restrict the business practices of a former employee for 30 years, this would likely be considered inappropriate by the average person. Texas courts have clarified that geographic restrictions permitted under a non-compete obligation must be limited to the area where the former employee worked and where the employer has business relationships. .