Texas businesses have been requiring employees to sign non-compete agreements for decades. Unfortunately, non-compete agreements have not been consistently held up in a court of law. When constructing a non-compete agreement, it’s important that you pay attention to three main factors to ensure its best chance of being upheld if brought before the court.
When restricting the practice of similar business activities, you’ll want to state a geographical scope that makes feasible sense for your business. You only want to name locations that are in the immediate vicinity of your business. If you restrict geographical locations that are outside of your business’s service area, it’s very unlikely that non-competition agreements will be enforceable in a court of law.
Limitations of activities
When it comes to limiting a person’s activity after they leave your business, you need to be specific. If you simply write in the non-compete agreement that they can’t work in the same industry, it’s unlikely that the contract will be enforced. You need to specify particular activities, such as working on the product development team for products that are similar in nature.
Duration of agreement
One of the biggest mistakes a business can make with non-compete agreements that makes them unenforceable in a court of law is that they make them for too long of a time frame. The duration of their contract should only last anywhere between 6 months to 1 year. Restricting any other business activities for longer than a year’s time will likely not be enforced.
As a business owner, it may be in your best interest to have employees sign a non-compete agreement. However, it’s important that you work with a lawyer to ensure that your non-compete agreement will be enforceable in the event that you need to do so. It’s important to address all three of the areas that we want over above within your contract for it to be valid.