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What Your Business Should Know About Non-Compete Agreements

Protecting your company’s proprietary information is critical to your continued success in the competitive marketplace. Non-compete clauses in employment contracts can often provide added help in preventing your competitors from obtaining key information from your former employees. Working with an attorney who specializes in Houston business law can ensure that your non-compete agreements are valid and enforceable. Here are four key facts you should keep in mind when taking steps to prevent the use of your proprietary information by those who have left your employ.

Non-Compete Agreements Must Comply with Texas Law

Section 15.50 of the Texas Business and Commerce Code was signed into law in 1989 and provides the guidelines that must be followed when designing non-compete agreements in Texas. Enforceable non-compete agreements must meet a number of criteria to ensure that the restrictions on employees must not be overly onerous in terms of duration, geographical location and scope of employment covered. If the period of time is too long or the geographical area covered is too broad, Texas courts may not uphold these agreements. Additionally, ruling out too broad an area of the job market may prevent your former staff members from finding suitable employment and may also result in the denial of your claims in the Texas court system. In most cases, the agreement must also be justified by the existence of confidential information or proprietary processes that could cause damage if disclosed to competing firms.

Smaller Scopes Are More Likely to Be Upheld in Court

While each case is different, reducing the scope of your non-compete agreement can sometimes lead to improved results for you and your former employees. Texas courts may be more likely to look favorably on non-compete clauses that restrict employment in reasonable ways:

  • Non-compete agreements that last for a year are usually considered reasonable if they are justified by the need to protect proprietary data or processes.
  • These agreements are also more likely to be upheld if they cover a single metropolitan area rather than an entire state.
  • Finally, restricting employment within a specific sector of an industry is usually considered more reasonable than preventing employment throughout that entire industry.

Retaining the services of experienced Houston civil litigation lawyers can often provide added help in drawing up non-compete agreements that are likely to stand up in Texas courts.

Non-Compete Agreements Are Not the Same as Non-Solicit Agreements

Non-competition agreements typically restrict former employees from participating in the same sector of industry for a fixed duration after leaving their employer. By contrast, non-solicit agreements typically prohibit staff members from taking their clients or other employees with them upon their departure from the firm. To further complicate matters, non-disclosure agreements may also be in place to prevent current and former employees from sharing confidential information with others outside the company. In some cases, your business may have all three types of agreements in place with your employees.

The Wrong Non-Compete Agreement Can Cost You

If the terms of your non-compete agreement are found to be unreasonable in a Texas court of law, you could be responsible for the attorney’s fees of your former employee as well as your own. This could add up to a significant financial risk for your company. Working with a qualified Houston business planning professional can help you to prevent these negative consequences while protecting your company against the actions of your previous staff members.

Enlisting the help of an experienced Houston civil litigation attorney can provide you with accurate guidance and professional representation for all your contract and employment law needs. The business law attorneys at The Law Office of Henry Jakob can help you create valid non-compete agreements that can protect your company against serious harm. To learn more about our extensive array of civil litigation services, call us today at 713.640.5700. We look forward to the opportunity to help you protect your business.