Restrictions on Competition in Texas

Matthew S. Veech

August 23, 2010

In Texas, as well as in many parts of the United States, employers often expect their key employees to sign agreements not to compete that take effect once the employee terminates employment and moves on to a new job. Under the right circumstances, Texas courts and laws will favor the protection of a business by enforcing a covenant not to compete even at the risk of making it more difficult for the employee to earn a living. These covenants may be drafted to keep the former employee from soliciting business from a customer he worked with while under the agreement and/or restrict the employee from working altogether in the same type of business as his former employer.

Elements of an Enforceable Non-Competition Agreement in Texas

Among other requirements, a non-competition agreement in Texas must be reasonable in time (how long is the employee restricted), territory (where is the employee restricted from competing) and scope (what is the employee prohibited from doing). Drafting these restrictions properly is dependent upon the individual situation. Typical provisions will include:

  • a one-year time restriction
  • a prohibition in the geographic area in which the employer was doing business (which might be world-wide under the right circumstances)
  • limiting the employee from performing the same services for a new employer as he was performing for his old employer

A key to an enforceable non-competition agreement is the promise of the employer to provide the employee with confidential information in order for the employee to perform his job, and the employer actually making good on that promise (meaning the employer did provide the confidential information).

Non-competition agreements are often a key part of doing business for employers and their key employees in Texas. Drafting and enforcing these agreements requires an attorney who experienced in this arena and who keeps up with the ever-changing law and court decisions.