Texas Noncompete Agreement: What's Included and Enforceability

Is a Non-Compete Agreement Enforceable in Texas?

In Texas, non-compete agreements that restrict employees from competing against former employers in similar industries are permitted and can be legally enforced. For a non-compete agreement to be legally enforceable, it must meet certain requirements laid out in Texas state laws.

Some of these requirements include:

• The non-compete must be signed at the time of employment and be ancillary or part of an offer for employment.
• There must be limitations on the duration of the agreement and the geographical area the agreement covers.
• There must be limitations on the scope of activity that the agreement restricts.
• Physicians who sign non-compete agreements cannot be denied access to a list of previous patients and medical records.
• Attorneys cannot participate in non-compete agreements.

As long as these conditions are met, most non-compete agreements will be enforced in Texas.

How Long Does a Texas Non-Compete Agreement Last?

The Texas Court of Appeals has regularly enforced non-compete agreements that last between two and five years. This time frame has been ruled reasonable in the eyes of the court.

When looking at the duration of a non-compete agreement, courts will also consider the geographic boundary. The geographic area that is restricted under the non-compete agreement must be an area where the employee or worked or where the employer conducts business.

How Do You Get Around a Non-Compete Agreement in Texas?

Even though non-compete agreements are enforceable in Texas, there are a few ways to potentially get around them.

Here are some of the ways:

1. Challenge the agreement's validity. You may be able to challenge the validity of the non-compete agreement if it is overly restrictive in terms of time, geographic scope, or the type of work it covers. The agreement must be reasonable and not impose undue hardship on the employee.
2. Negotiate with your employer. If the non-compete agreement is overly restrictive, you can try negotiating with your employer to have it modified or narrowed.
3. Look for a loophole. Sometimes non-compete agreements contain loopholes or exceptions that you can exploit. For example, the agreement may not apply to certain geographical areas or job functions.
4. Wait it out. If the non-compete agreement has a time limit, you can simply wait until it expires before entering into competition with your former employer.
5. Ask the court to modify. Texas allows courts to “blue pencil” or modify overly broad or restrictive non-compete agreements. If a term or restraint is more than necessary to protect the employer’s interests, you can request that the term be reasonably modified.

What Happens If You Break a Non-Compete Agreement in Texas?

If you violate a legally enforceable non-compete agreement, you could face serious repercussions. Once a non-compete is violated, your former employer can petition the court for an injunction to order you to stop the activity that violates the contract. From there, your former employer could file a lawsuit against you for breach of contract in an attempt to recover financial damages.

Texas allows punitive damages to be awarded in breach of contract cases. This means that the breaching party could be fined for their wrongdoing on top of any damages the court has already awarded the non-breaching party. In past cases, Texas courts have awarded employers over $100,000 in punitive damages following a breach of a non-compete agreement.

What Voids a Texas Non-Compete Agreement?

A non-compete agreement in Texas will be void if it lacks adequate consideration. Continued employment is not adequate consideration in Texas so when a new employee signs a non-compete, it must be supported by independent valuable consideration like a new position, raise in pay, or additional benefits.