Non-competition agreements, or non-competes, are a valuable asset to many business owners. Unfortunately, these agreements can quickly become the subject of disputes, largely because one or both parties do not really understand what the agreement means. Here are three of the most common misconceptions about enforcing non-compete agreements in Texas. Every business owner, employee, or contractor should be aware of what non-competes really mean.
Three Common Misconceptions about Enforcing Non-Competes
Here is a quick explanation of the three most common misconceptions about non-competes in Texas. To learn more, contact Daic Law to speak with our corporate and business law attorney.
Misconception One: Non-Competes are Not Enforceable in Texas
The number one misconception is that Texas will not enforce non-compete agreements. Texas courts will enforce non-competes drafted in the state, so long as they comply with Texas Business and Commerce Code Section 15.50. According to Section 15.50, the non-compete is enforceable if:
- It is ancillary to another agreement that is enforceable, such as an employment or contractor agreement.
- The restrained party (employee or contractor) is given consideration (trade secrets, proprietary information, etc.), and that restraint is reasonable in duration, geography, and scope.
Determining that a non-compete is “reasonable” is a key element here. Often, determining what is reasonable depends on the individual nature of the business, information being protected, geography or market, and common time in which information may become public knowledge.
Misconception Two: Employers Seeking Enforcement will Recover Attorney’s Fees
The Civil Practice and Remedies Code of Texas allows for plaintiffs to recover reasonable attorney’s fees when pursuing business-related claims like a breach of contract. Unfortunately, when it comes to non-competition clauses housed in an employment or contractor agreement, it can be more difficult to identify fees that may be recovered. For example, many state appellate courts have ruled that the terms of a non-compete preempt other laws. Therefore, if there is no specific designation in a non-compete for parties to recover fees, then the court may not allow fees to be recovered.
Again, the specific circumstances of any legal case will determine what laws and regulations apply. There are circumstances that will allow employers or employees/contractors to recover attorneys fees after a dispute, but these situations vary.
Misconception Three: Non-Solicit and Non-Compete Agreements are Treated Differently
A non-solicit agreement is similar to a non-compete in that both agreements relate to competition after termination or expiration of a contract. More specifically, a non-solicit agreement requires the former employee or contractor to not solicit former coworkers, employees, or customers for the purposes of starting a new business or engaging in other business-related activities. Texas courts observe that the two concepts are different, but often they are viewed under the same statutes, and have the same requirements concerning reasonableness in order to be enforceable.
Avoiding Misconceptions and Confusion in Non-Competes
When it comes to contracts, there are many complexities that can quickly become confusing if a dispute arises. The best way to avoid misconceptions and confusion is to work with an attorney throughout the contract process. From drafting to review, revisions to resolving disputes, Daic Law can help alleviate confusion and protect your legal rights.
Contact Daic Law by calling (713) 808-5246, or email us at info@daiclaw.com.
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