Many businesses in the Dallas area may have heard that the federal government will attempt to ban businesses from using non-competition agreements.
Believing that non-competition agreements keep the wages of workers who sign them unfairly low, the Federal Trade Commission has proposed a rule which would prohibit businesses from using non-competition agreements as an unfair practice.
The rule would apply retroactively, meaning existing agreements will be invalid and employers will have to notify their employees and contractors accordingly.
On the other hand, the Federal Trade Commission will not disturb existing confidentiality and non-disclosure agreements.
Importantly, this provision currently is only a proposed rule. As it stands, the earliest the rule would take affect is the middle of 2024. Legal challenges to this rule are likely, and that could delay things further.
For now, in Texas, non-competition agreements remain legal. However, there are several restrictions on the use of these agreements.
For example, the state’s courts expect the business wanting to enforce the agreement to show how the agreement protects the business from financial harm without leaving the person who signed it unable to find work.
Businesses may need to defend their use of these agreements in court
In the present legal climate, businesses can almost expect that if they wish to enforce a non-competition agreement, they will have to resort to litigation or at least the threat of litigation.
On the other side of the coin, sometimes a business will want to support a prospective employee in challenging an agreement that person signed.
Because the facts and circumstances matter a lot when it comes to the enforceability of Texas non-competition agreements, it is important that those involved in a dispute understand all the details of their respective cases.
While going to court is sometimes the best option, in many other cases, a business will find it more effective to negotiate a solution.
Texas businesses should understand their options when facing a disagreement over a contract with a non-competition clause.