With the tech industry becoming increasingly competitive, employee turnover can be a direct threat. The risks escalate when your key talent takes proprietary information to a competitor.
As a business owner, you likely have non-compete agreements (NCAs) in place. But are they legally enforceable? In Texas, the answer depends entirely on how you drafted your restrictive covenants.
The enforceable foundation for NCAs
Under the Texas Business and Commerce Code, an agreement restricting a former employee’s right to work must be part of a valid contract, supported by adequate consideration. That means the contract should contain an offer, acceptance and a value exchanged by both parties.
The ancillary element supports the employee’s promise not to compete. As the employer, you can provide them with access to trade secrets and specialized training. Without this, the agreement can be unenforceable. This is the most heavily litigated part of the Texas Non-Compete Act, as former employees can dispute that their contract lacks this factor.
The importance of specificity in NCAs
Building an enforceable foundation for an NCA is necessary, but it must also meet the requirement of reasonable limitations. You cannot impose a greater restraint than necessary to protect your business interests.
The courts analyze this necessity through time, geographical area and scope. If the judge finds your NCAs contain broad restraints on trade, they can disfavor your side.
Reviewing your covenants to ensure compliance
If a judge finds your NCA overly broad, they can change the unreasonable restriction to achieve a rational protection of your interests. Instead of waiting for this scenario, review your NCAs now to assess their compliance. Seeking legal advice can be a good resource for verifying whether your contracts meet state requirements.