When an employee leaves a company to work for another company in the same industry, their former employer may be concerned that all the training and information the employee received during their employment with that employer may end up helping their competitor. For that reason, many employers require their employees to sign non-compete agreements, along with their employment contracts, when they are first hired.
Non-compete agreements are legally binding contracts intended to protect a company’s business interests by preventing the employee or contractor from doing anything that would harm the company’s finances or reputation. In Texas, an enforceable non-compete agreement must:
- Be accompanied by an employment contract or other enforceable agreement.
- Be supported by consideration.
- Include reasonable terms with regards to time, geographic scope, and activities.
A non-compete agreement must not be unreasonably restrictive to the employee. A standard non-compete agreement may specify:
- Duration: An employer may only prevent a former employee from working for a competitor for a reasonable period of time. Generally, the duration is usually anywhere from six months to two years, depending on state law.
- Location: An employer may specify a geographic limitation by specifying that a former employee cannot work within a reasonable radius of the company’s headquarters. Generally, the radius could be anywhere from 15 to 75 miles.
- Activities: An employer may limit the scope of the employee’s activities within the same field/industry as the employer.
If an employee fails to follow the terms of a non-compete, the employer may bring a lawsuit against them for damages. However, the employee may claim that the restrictions in the agreement are overly broad or that the employer is trying to protect illegitimate business interests.
Non-compete agreements are intended to protect employers, while not unfairly burdening employees. If you are involved in a dispute with your former employer or employee, an attorney can help you resolve your conflict through business litigation.