When an employee is discussing taking a new job, or entering the world as an entrepreneur, it may seem like an ideal time to negotiate a non-compete agreement because there is no disparity in bargaining power. Employees usually do not feel pressured to sign the agreement simply because it may be included as part of being a “New Hire.”
Employers, of course, wish to secure a non-compete agreement earlier in the employment relationship (for free), but paying for a non-compete agreement is better received at any time over having nothing at all. By the end of employment, an employer may even possess a better sense as to whether a particular employee poses a competitive threat and should be subject to restrictive covenants. In contrast, employees often make a rational economic decision about whether they prefer to accept a severance payment and temporarily limit their future job options, or instead forego the severance payment and keep their job options open.
VALIDITY OF AGREEMENTS
Historically, Texas courts were reluctant to enforce non-compete agreements in principle that they constituted a restraint of trade and against the public policy of Texas. Recently, however, both the Texas Legislature and the Texas Supreme Court have issued legislation and rulings that makes it easier for an employer to enforce non-compete agreements and restrict a former employee’s ability to compete.
Under Texas law, certain conditions must exist in order for the non-compete to be enforceable, The “consideration” that an employer provides in the non-compete agreement must have a “reasonable relationship” to the employer’s interest in restraining the employee from competing. This consideration requirement also applies to provisions restricting the solicitation of customers or employees. Although in recent years Texas has broadened the types of “consideration” that can create an enforceable non-compete or non-solicitation agreement, a monetary payment at the time of termination does not suffice from an employer.
A non-compete agreement must pass two basic legal hurdles. First, the reviewing court must find that any restrictions contained in the non-compete agreement comply with Texas law and are reasonable in terms of time, scope and geographical location. If it is not reasonable, a Texas court can reform or re-write it to make it reasonable.
Second, and most important, is that in Texas, a non-compete agreement will only be enforced to an extent that it is “reasonably necessary” to protect the legitimate goodwill expectations of the employer. The plain meaning provides leverage for a court to use its discretion to loosen the literal restriction when an enforcement of the non-compete agreement to the fullest extent would result in an unjust results to an employee.
The Law Office of Nicole Conger, PLLC successfully works with clients to creatively, strategically, and concisely utilize procedures to negotiate or defeat non-compete restrictions to make them reasonable under the circumstances.