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3 things a Texas non-compete agreement needs to be enforceable

On Behalf of | Apr 14, 2022 | Business & Commercial Law

If you are launching a new business in Texas, you might want to include a non-compete agreement in your new employee onboarding paperwork. This is especially true if your company is in an industry such as information technology, manufacturing, finance and corporate business. The reason is that these types of businesses are more likely to have trade secrets or other proprietary information that poses a risk if shared with their competitors. 

Non-compete agreements also can protect business owners from employees working directly with competitors or taking clients with them if they leave the company. In general, the more specialized the trade, the more beneficial such an agreement can be.

What to include in the non-compete agreement

For the agreement to have any value, you need to be able to take recourse in the event that the agreement is violated. Texas courts may recognize the violation of a non-compete agreement as long as it contains details of:

  • A specified duration of enforceable time
  • A specified and relevant geographical area
  • A detailed description of the enforceable scope of activity

In general, courts want to encourage competition among differing businesses, so your non-compete agreement needs to be detailed and clear about what is and is not acceptable. For example, if you run a real estate company, your non-compete agreement might specify that realtors cannot take prospective client lists with them if they quit the group. It also needs to be reasonable in the restrictions it imposes.

Trade secrets and client lists are often the lifeblood of specialized companies, so the sharing of such information can be detrimental. Working with someone familiar with business contracts can be beneficial when determining how to craft your agreement.