A covenant not to compete is a promise by an employee not to compete with his or her employer for a specified time in a particular place. A covenant not to compete, which is also known as a non-competition agreement, may be a clause in an employment agreement or a separate contract standing by itself.
In the past, Texas courts traditionally frowned on restrictions placed by employers on their employees’ right to find and make a living. However, over the last 10 years, Texas courts have been showing increasing willingness to uphold noncompetes in recent years and will enforce a non-competition agreement if:
- the employer proves that it has a legitimate business interest to protect by restricting its employees’ right to compete against it;
- the restriction on the employee’s right to compete is no greater than that necessary to protect the employer’s business interest; and
- the covenant not to compete is supported by appropriate consideration, meaning that the employee received something in exchange for it.
Whether the "consideration" offered by the employer is adequate to support a non-compete agreement is an extremely thorny issue. Under Texas law, money alone is not sufficient. Normally in order to enforce a non-compete agreement, an employer must agree to provide an employee with confidential business information or trade secrets and, in return, the employee promises not to improperly disclose or use the employer’s sensitive information.
The area of non-compete law is extremely complicated and must be analyzed on a case-by-case basis. If you are dealing with such a situation, contact The McKinney Law Firm for a consultation.