As a previous post has discussed, non-compete agreements are a contract clause that Texas employers may use to prohibit workers from working for their competitors after leaving their employment. Sometimes, however, issues may arise when employers seek to enforce such covenants. Therefore, it behooves business owners to understand when covenants not to compete are enforceable to help ensure that these clauses are structured appropriately.
In general, there are certain requirements that must be met in order to enforce non-compete agreements. Under the Texas Free Enterprise and Antitrust Act of 1983, covenants not to compete are only enforceable if they are supporting, or a part of, agreements that are otherwise enforceable. For example, if a legally binding employment contract includes a non-compete agreement, the court may hold an employee to it.
Furthermore, the limitations in non-compete agreements must be reasonable for them to be enforceable. This includes the restrictions regarding the time, geographic area and the scope of activities that are covered by covenants not to compete. While there are no specific guidelines with regard to these limitations, the court may not uphold non-compete agreements that seem unreasonable. For example, an employee who formerly sold products in the Dallas-Fort Worth area to an agreement that prevents them from seeking similar employment in the San Antonio area.
The Texas Workforce Commission points out that most court rulings on issues relating to non-compete agreements err on the side of promoting competition. Consequently, employers may need to show that enforcing such covenants would not unreasonably burden the workers. They may also be required to prove how not enforcing this type of an agreement would harm economic competition.