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May 13, 2022, 9:01 am

The Basics of Non-Compete Agreements in Texas

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  • Update Time : Sunday, June 23, 2019,

Trade secrets play an important part in the operations of many businesses. Whether it’s an upcoming product line, a planned marketing strategy, or a database of customers, millions of dollars can be at stake if information winds up in a competitor’s hands. Because of these risks, many employers require their employees to sign a non-compete agreement, also known as a covenant not to compete or a no compete clause. There are certain laws established by Texas that these agreements must follow, and it is important for both employers and employees to understand the conditions that these contracts must meet.

A non-compete clause usually limits the signer from either working for a competitor or starting their own competing company within a certain time frame or geographical limit. Courts are careful to only uphold these clauses if they restrict the individual to a “reasonable” amount, as defined by TX Sec 15.50. This varies based on the circumstances involved, but clauses that act beyond strictly protecting the company’s interests are typically over-turned in court. For example, if an agreement limits an employee from working in any related field for 30 years, the likelihood of its enforcement is very slim.

The three areas that are usually scrutinized if these clauses are brought before court are:

the time limit,
geographical restriction,
and necessity of the clause.
One of the requirements that an employer must fulfill to gain an employee’s agreement to limit their future opportunities with a non-compete pledge is an obligation to provide the employee with compensation that justifies the restrictions placed on them. This can include a pay raise, stock options, or employment if the individual is requesting a position in the company.

In 2001, the U.S. Supreme Court ruled on Marsh USA Inc vs. Cook that stock options were sufficient consideration for a non-compete clause. Prior to this, the value of the trade secrets or specialized training that the employee pledged to keep private was considered fair compensation. In the wake of this decision, many states have updated their policies regarding non-compete agreements, including Texas.


One specific exception that Texas provides for in these situations refers to physicians. According to Texas Business and Commerce Code Sec. 15.50b, a physician cannot be kept from “providing continuing care and treatment to a specific patient or patients during the course of an acute illness even after the contract or employment has been terminated.” This protects patients from losing the care of a doctor who is familiar with their specific situation.

Individuals that are asked to sign a contract that includes a non-compete clause or employers who are interested in implementing this kind of agreement might need to consult a business lawyer to ensure that the covenant is reasonable and agreeable to both the business and the individual employed there. If a person feels that they are currently restricted by an unlawful or unreasonable clause, there are legal options available to attempt to overturn the agreement.

Article Source: http://EzineArticles.com/7807544

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