Non-Compete Agreements

Non-Compete Agreements Have Limits

It is common in Texas, as well as across the United States, for employers to ask their employees to sign non-compete agreements. These are used to stifle competition and innovation by ensuring that an employee who leaves the company cannot immediately go to work for a rival organization or start their own competing business. While these restrictions can be fairly limiting, Texas state law does place limits of its own on how strict non-compete agreements can actually be. Under Texas law, a non-compete agreement must put reasonable limitations on the geographical area the agreement covers, the scope of activity that is restricted, and the length of time the agreement will be in effect. If any of these limitations is found to be unreasonable, the agreement is either invalid or must be rewritten so that it is reasonable.

What Is Reasonable for a Non-Compete Agreement?

While limitations on time in non-compete agreements can vary, courts have found that agreements lasting up to 2 years are reasonable. There are outliers finding longer terms to be reasonable, but an agreement that is too long runs the risk of being invalidated. A non-compete agreement that lasts for 10 years, or one intended to be perpetual, is not “reasonable.” If your employer wants you to sign a non-compete agreement of that length, it is not likely to be valid.

Texas courts also apply distinct standards to the limitations on geographical area and scope of activity. In general, such limits are only upheld as acceptable when they are proportional to the role that an employee played at their previous employer. For the average worker, restrictions are generally only reasonable if they are tailored to the specific tasks they performed at the company or limited to the specific area (likely the county) in which they worked. Wider restrictions, such as preventing an employee from working at a competitor anywhere in the United States, will only be upheld if the employee in question had responsibilities that truly concerned the entire country. This is most common for high-level employees.

Extreme restrictions, such as worldwide bans on a specific type of activity or a complete prohibition from working within a specific industry, are generally considered to be unreasonable. In the past, courts have preferred the geographic scope of a non-compete agreement to be inversely proportional to the amount of activity it prohibits. Agreements with a wide geographical scope must thus be narrowly tailored to a specific type of work within the industry, usually exactly what that worker did for the company. Agreements that prohibit employees from engaging in more types of work are only considered reasonable if they have a stricter geographical scope, so that the employee is free to move outside its boundaries. If you feel that the terms of your non-compete agreement will completely block you from working in your chosen field, or its geographical restrictions are excessive, it is worth consulting with one of our Austin employment lawyers, who will help you determine whether or not the agreement is valid.

This Area of the Law Is Complicated

Non-compete agreements can be very technical and full of specific wording. Agreements that are broadly written present a different challenge, because in that case it can be difficult to determine the exact scope of its restrictions. In either case, if you feel that your non-compete agreement is overly restrictive or may not be valid, you should contact an attorney. The employment lawyers at our Austin office will be able to help you figure out just how extensive your non-compete agreement is, and whether it can be challenged in court. In some cases, simply communicating with your employer to determine exactly what it is they want to prevent you from doing can help resolve these situations; our lawyers can help with that as well. If you have questions about a non-compete agreement, you can get in touch with us by filling out our intake form or calling our office at (512) 271-5527.