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Understanding Texas noncompete clauses

It can be hard to sort out what’s valid and invalid amid the clatter about noncompete agreements. The facts say that nearly one-in-five Americans is party to such a contract, but many of those contracts don’t hold up in court. Employers want to protect their interests, and they are allowed to under the law in most situations. But employees, too, have rights, and sometimes it infringes upon the employee’s right to earn a living.

State law defines the terms

Noncompetes are a complex topic, and Texas has particularly stringent regulations on the topic. A noncompete agreement is binding in the state, but only if it “ is ancillary to or part of an otherwise enforceable agreement,” according to state law.

In short, this means the noncompete must work in conjunction with an employment contract, and that is must include details about time duration, geography and matters like the scope of the work performed. The primary legal question is that these details must be within reason, which is open to interpretation. Geography, for example, may suggest an employee cannot accept another job in the same field in the same metropolitan area, but it likely cannot enforce such a restriction across the whole state or region. However, this is dependent on the nature of the business and the competitive landscape on a specific industry.

Serving a key purpose

Noncompete clauses are often necessary to protect intellectual property and business trade secrets, such as a client list or key software patent that separates your company from the competition. They are also helpful in a startup operation to prevent copycat competitive businesses from former employees with privileged information.

The Texas law is specific. In some states, like a new law passed in Idaho last year, they take a broader meaning that often keeps employees in-house. Some argue that they restrict the free market, making it harder to recruit good employees. Proponents stress that they help retain good employees.

A contract should protect business, not cost extra

Noncompete clauses can protect your business, but they are difficult to enforce under Texas law. It’s necessary to create any contract carefully, as legal disputes that arise can be costly and take resources away from your business growth as you focus on retention. If your business is considering use or enforcement of a noncompete clause, it is wise to consult with an experienced business litigation attorney to review your situation on a case-by-case basis.

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Phone: 346-800-6101
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