Charles Vethan: Hi, I’m Charles Vethan. Welcome to the Vethan Law Firm P.C.’s Video Educational Series. Today’s topic will be the Texas non-compete.
Joseph Lanza: The economy is booming in Texas, especially in the oil and gas and technology sectors. One of the legal issues that have come to the forefront is the enforceability of non-compete agreement. Seth what is a non-compete agreement?
Seth Grove: A non-compete agreement is what an employer can use to protect themselves from training an employee, giving them all of the valuable information of the company and then seeing that employee walk out the door and develop a competing company. Joe what does a business lawyer like us to draft a valid non-compete agreement?
Joseph: Two things are required for a valid non-compete agreement. The first requirement is that it will be part of a related to enforceable contract. By this, I mean the employer has to offer something to the employee in exchange for the employee’s promise not to compete at a later date. A promise of employment or raise or a bonus is not enough, there has to be something more. An exchange of confidential information or access to trade secrets or specialized training, even an ownership interest in the company have all been held sufficient to support an employee’s promise not to compete at a later date. The second requirement for a valid non-compete agreement is that the restrictions placed upon the employee must be reasonable. Seth what is a reasonable restriction?
Seth: Joe it has to be reasonable in three ways. First, it has to be reasonable as to the activity that’s being restricted. Second, it has to be reasonable as to the amount of time that the employee is being restricted. Third, it has to be reasonable as to the geographic area that the employee is restricted from competing in. What happens if it’s overbroad?
Joseph: If the restrictions are unreasonable or overbroad that’s where the courts become involve, generally the courts will rewrite the restrictions so that they are reasonable. Seth, any final thoughts on non-compete agreement?
Seth: Final thought is that even if you fire an employee, a non-compete agreement is still generally enforceable.
Joseph: For more information, see our website, www.vethanlaw.com.