Are Non-Competes Limited to the State of My Employer?
Our Lake Jackson, Brazoria County business law attorneys explain when limitations on the geographical area where former employees can work are valid in non-compete agreements.
Non-compete agreements help to protect the investment companies make in their employees and prevent them from revealing confidential information to competitors. As a legal contract, a non-compete agreement is enforceable in court but it must be reasonable in nature. Our Lake Jackson business law attorneys explain how this impacts geographical work restrictions and whether non-compete agreements can be limited to a certain state.
Non-Compete Agreements in Texas
In Texas, employees can be fired for any reason or even no reason at all. After leaving a job, workers have a broad common law duty not to retain customer lists or contact former clients and to refrain from revealing trade secrets or other confidential information from their former employer.
In some cases, companies will take this a step further by having their employees sign a non-compete agreement when they are hired. Under the Texas Business and Commerce Code, a non-compete agreement must support the actual needs of the organization and be part of an otherwise enforceable agreement, such as an employment contract. It must also contain consideration for any promises made, such as the sharing of confidential information, specialized training, or other proprietary information. Provided it meets this standard, a non-compete agreement may include the following limitations:
- The amount of time an employer must refrain from working in a certain field once they leave the company;
- The scope of activities limited by the non-compete agreement;
- The geographical area in which the covenant to not compete applies.
Reasonable Geographic Limitations in a Non-Compete Agreement
In a 2011 Texas Supreme Court case (Marsh USA Inc. v. Cook, 354 S.W.3d 764, 773)
on the enforceability of non-compete agreements, the court addresses the requirement that any limitations on the employee must be reasonable. The law explicitly states that a non-compete or other employee contracts are not enforceable if they hinder legitimate competition between businesses or the movement and employability of otherwise skilled workers.
Non-compete agreements are not limited to the state of the employer. However, factors the court will consider in determining whether it is enforceable include:
- The length of time the non-compete agreement is in effect;
- Whether it covers a limited or broad geographic area;
- Whether the company actually does business in particular cities, states, or regions in which the non-compete agreement applies.
Generally, a non-compete that applies for an extended period of time to multiple states or regions and places where the employer does not currently conduct business will not be enforceable in court; however, each non-compete and employee require a specific analysis.
Contact Our Lake Jackson, Brazoria County Texas Business Law Attorneys Today
At Cordoba Law Firm, PLLC, we provide the trusted legal guidance you need to determine whether your non-compete agreement is enforceable. To discuss your options, call or contact our Lake Jackson business law attorneys online and request a confidential consultation today.