Non-Competition Agreement Disputes
Non-competition agreements, also known as covenants not to compete, are commonly used in Texas to protect the goodwill and business interests of companies. The use of these agreements allows companies to properly train employees and provide them with confidential information such as trade secrets without fear that the employee will leave the job and set up shop in competition. Civil litigation involving non-compete agreements is often necessary to stop improper competition and protect company information.
Must be Part of Another Contract
The law involving non-competition agreements is constantly evolving and there are often agreements drafted and signed by companies and employees which are in fact unenforceable.
Texas law provides that a covenant not to compete is valid if it is part of another agreement and reasonable as to time and geographical area. Traditionally, non-compete agreements have been made a part of other agreements such as confidentiality agreements. That is, the employer agrees to give the employee confidential information and training and in exchange, the employee agrees not to compete with the employer for a certain period of time. This satisfies the requirement that the covenant not to compete be ancillary or a part of another enforceable agreement.
Must be Reasonable in Time and Geography
Covenants not to compete must be reasonable as to time and geographical and not impose a greater restraint than is necessary to protect the goodwill or other business interest of the company.
- Reasonable in time. Texas Courts are very careful not to cause a worker to be prevented from working for a long period of time just because it is provided so in a covenant not to compete. In some cases, six months might be considered reasonable while in others two years would be acceptable.
- Reasonable geographic area. One mistake that employers make is that they go overboard in the geographic restrictions such as containing a non-compete provision that prevents an employee from working in a particular state or throughout the nation when the employees territory was local. This is a major error because if the geographical area is considered too broad, the entire contract would be considered void. The best course of action is to limit the geographical area to the territory in which the employee worked. This might be a city, the entire state or, in limited cases, the entire country.
Enforcement of a Non-Competition Agreement
When a former employee breaks a covenant not to compete, the former employer’s business can be a great financial risk if the employee takes his or her knowledge and training and goes into direct competition. The most common (and most effective) remedy for a company is to go to court to seek an immediate court order stopping the employee from competing – or using confidential information. This is known as a temporary restraining order or “TRO” and is obtained from a judge as soon as a breach of contract lawsuit is filed.
If you are involved in a lawsuit involving a non-competition agreement or a contract with a covenant not to compete, contact the business litigation lawyers at Michael P. Fleming & Associates, P.C. by phone at (713) 221-6800 or filling out our contact form today.