Texas Tightrope: Balancing Non-Compete/Non-Solicitation Agreements for Employers and Employees in Texas

In the competitive business environment of Texas, employers often turn to non-compete and non-solicitation agreements as valuable tools to protect their interests. On the flip side, employees may find themselves negotiating the terms of these agreements when entering or exiting employment. In this blog post, we'll explore the enforceability of non-compete and non-solicitation agreements in Texas, shedding light on the pros and cons for both employers and employees. We'll also discuss why involving an experienced attorney, like me, is essential in the drafting and reviewing process.

Understanding Non-Compete and Non-Solicitation Agreements:

When you start a new job or leave an old one, you may be presented with a non-compete agreement. On the flipside, as an employer, you may be considering whether you should have your employees or independent contractors enter into such an agreement. Non-compete agreements restrict employees from engaging in competitive activities, such as working for a competing business, within a specified time and geographic scope after leaving their current position.

Non-solicitation agreements, on the other hand, prohibit employees, both during employment and for a period of time thereafter, from soliciting clients, customers, or fellow employees from their former employer. Texas employment agreements frequently contain non-solicitation provisions, along with non-compete and non-disclosure provisions.

Enforceability in Texas:

Texas law recognizes and enforces non-compete and non-solicitation agreements, but there are specific criteria these agreements must meet to be considered valid. Texas law generally disfavors arrangements that restrict employee mobility or hinder legitimate competition, so to qualify as an enforceable exception to this maxim, it is critical that such agreements meet the standards required by Texas law.

Non-compete agreements are enforceable in Texas if they are: (1) accompanied by or part of an otherwise enforceable agreement, (2) supported by valid consideration (i.e. something of value given to the employee), and (3) reasonable in time, geographic scope, and activities to be restrained. Texas courts will evaluate the reasonableness of restrictions, considering factors such as duration, geographical reach, and the legitimate business interests of the employer.

Non-solicitation agreements are enforceable in Texas, but they must comply with the statutory requirements against unlawful restraints on trade. Soliciting an employer's customers constitutes fair competition, and thus is not not actionable, unless prohibited by a valid covenant not to compete.

Pros and Cons for Employers:

Pros:

1. Protecting Business Interests: Non-compete and non-solicitation agreements help safeguard a company's confidential information, trade secrets, and client relationships.

2. Attracting Talent: Having enforceable agreements in place can make it more attractive for high-level executives and key employees to join the company.

Cons:

1. Restrictions Must Be Reasonable: Overly restrictive agreements may be deemed unenforceable by Texas courts.

2. Potential Legal Challenges: Employers may face legal challenges if the agreements are not carefully drafted, leading to potential disputes and costs.

Pros and Cons for Employees:

Pros:

1. Negotiation Leverage: Skilled employees may negotiate for more favorable terms, such as reasonable restrictions and compensation during the non-compete period.

2. Freedom to Pursue Opportunities: Employees may have the flexibility to explore new opportunities without facing overly burdensome restrictions.

Cons:

1. Limited Job Mobility: Non-compete agreements may limit an employee's ability to work in the same industry or region for a specified period.

2. Potential Legal Consequences: Violating the terms of non-compete or non-solicitation agreements can lead to legal action and financial consequences.

The Role of an Attorney:

Whether you are an employer drafting an agreement or an employee reviewing one, involving an experienced attorney is crucial. Here's why:

1. Legal Expertise: Attorneys, like me, possess an understanding of Texas employment laws and can ensure that agreements comply with legal standards.

2. Customization: An attorney can tailor agreements to the specific needs and circumstances of both the employer and the employee.

3. Negotiation Skills: Attorneys can negotiate on behalf of their clients, ensuring that the terms of the agreement are fair and reasonable.

4. Dispute Resolution: In the event of a dispute, having an attorney involved from the beginning can facilitate resolution and protect the interests of both parties.

Conclusion:

I can help you set up the various agreements you need for your business to run smoothly. If you have already had your employees sign agreements, I can assist by reviewing the agreements to verify that they are enforceable and protect your business as much as possible. Having a lawyer prepare or review your business's agreements could prevent issues surrounding those agreements in the future.

On the other hand, if you are an employee, I can review a proposed non-compete (often presented in conjunction with an employment agreement) to advise as to whether it is appropriate and legally sound. In the event the terms are unduly restrictive or otherwise inadvisable, I can counsel you accordingly and potentially assist with negotiating with your prospective employer for more suitable terms.

Non-compete and non-solicitation agreements play a crucial role in shaping employer-employee relationships in Texas. Understanding the nuances, weighing the pros and cons, and involving an experienced attorney, like me, in the process can lead to well-crafted agreements that protect the interests of both parties and stand up to legal scrutiny. For personalized advice tailored to your specific circumstances, consult with Aly Halpern or an experienced employment attorney of your choosing.