What are Some Examples of Reasonable Business Interest that Can Be Protected by a Non-Compete Agreement?
Non-Compete Agreements in Texas are Only Enforceable in they Protect a Reasonable Business Interest
A business or organization may require an employee to sign a non-compete agreement. In Texas, non-competes are an acceptable restraint on commerce—but they must be reasonably narrow in scope. A non-compete that does protect a “reasonable business interest” may be invalidated by a court. In this article, our Pearland and Lake Jackson business law attorneys provide a comprehensive guide to reasonable business interests and non-compete agreements in Texas.
What is a Non-Compete Agreement?
A non-compete agreement is a type of restrictive covenant. It is a contract whereby one party agrees not to compete with the other during their commercial relationship and for a pre-specified period after that relationship ends.
Non-Competes are Enforceable in Texas, But They Must be Reasonable in Scope
Non-compete agreements are not allowed in every state. For example, in California, employee non-competes are generally deemed unenforceable. Non-compete agreements are allowed in Texas. Though, state policy looks somewhat disfavorably on restraints on trade—meaning a non-compete contract must be appropriately narrow to be enforced. As explained by the Texas Workforce Commission (TWC), a non-compete agreement is only legally valid if it meets the following four requirements:
- A non-compete must be ancillary to an otherwise permissible contract;
- A non-compete must be reasonably narrow in its geographic scope;
- A non-compete must be reasonable in its time (cannot last forever); and
- A non-compete must protect reasonable business interests.
Examples of Reasonable Business Interests that Can be Protected
As part of the analysis to determine whether a non-compete contract can be upheld in Texas, a court will carefully consider the “business interests” that are being protected by the agreement. The interests must be legitimate and reasonable. Otherwise, the agreement may be thrown out. Some notable examples of reasonable business interests for non-competes in Texas include:
- Trade Secrets and Other Confidential Information: A business that has trade secrets or other commercially valuable confidential business information can use a non-compete to help protect this interest.
- Key Customer/Client Relationships: A non-compete agreement can also be used to help protect and preserve certain key customer/client relationships.
- Specialized Training: Finally, a non-compete may be used in Texas if a company or organization put significant resources into specialized training for an employee or contractor.
Contact Our Pearland, TX or Lake Jackson, TX Business Law Attorneys Today
At Cordoba Law Firm, PLLC, our Texas business lawyers have the skills and experience to draft, review, and negotiate non-compete agreements. If you have any questions about reasonable business interests and non-compete agreements, we are here to help. Contact our law firm today to arrange your strictly confidential initial consultation. With legal offices in Lake Jackson and Pearland, we provide business law representation throughout Brazoria County including Pearland, Manvel, Angleton, Lake Jackson, Clute and Freeport and Matagorda County.