Noncompete clauses and agreements appear frequently in employment and other types of business contracts. In the employment scenario, a noncompete requires the employee to agree that upon termination or resignation, he or she will not enter into or start a business similar enough to the employer to be considered a competitor. Such agreements are aimed at preventing employees from using the employer’s confidential information, trade secrets, or client lists in gaining a competitive advantage either for a new employer or for their own enterprises.
On one hand, noncompetes protect employers from potential loss of business that could result from employees leaving to join a competitor or start their own competing businesses. However, an overly broad agreement could in theory prevent an employee from working for any employer in a position that matches his or her skillset.
Texas state law provides that a noncompete clause is only enforceable if the following conditions are met:
There are many nuances affecting the enforceability of these provisions under Texas law, but the above are the basic rules of noncompete clauses in Texas.
For more information, visit the Texas Workforce Commission’s page Conflict of Interest, Trade Secrets, Non-Competition Agreements.