Employers may ask employees to sign a noncompete agreement in Texas. These agreements can be vital to employers because they assure that the employee does not start a competing company or go to work for one of the employer’s competitors.
Reasons to use a noncompete agreement
Employers may want to have key employees sign a noncompete agreement, so if the employee decides to leave, they do not provide vital information, such as pricing strategies, formulas, ideas for future products and marketing plans to a competitor. Additionally, employers use these agreements to ensure that when a person leaves, they do not take other employees with them.
What must a noncompete agreement have to be legal
The first thing that a noncompete agreement must have is a beginning date, and it must also contain the reasons for putting the agreement into effect. The agreement must also state specific locations, and the time the employee will be banned from competing with the employer. Finally, the agreement must state what the employee how the employee will be compensated for abiding by the contract.
Are noncompete agreements enforceable in Texas?
Noncompete agreements in Texas are enforceable, but there are other factors that a judge may consider. A judge must find that the contract is reasonable in scope. The Texas Supreme Court, in the Marsch Case, ordered judges to determine if the agreement was unnecessarily restrictive. The agreement must be reasonable in scope, not be too broad and have a reasonable geographic scope.
Penalties for breaking a noncompete agreement
A judge may order the person to pay monetary damages if someone breaks a noncompete agreement. That amount may include punitive and liquidated damages.
Texas employers can ask employees to sign noncompete agreements that are reasonable in scope, and Texas courts may enforce them.