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Part One: Who, What, When, Where & Why of Non-Compete Agreements

Non-competition agreements and their enforceability are the subject of many blogs and legal articles floating the web.  I typically stray from over-blogged topics such as this, however, each time I am confronted with an issue involving a covenant not to compete, I find that the information on the web tends to be overly general and fails to address real-world practical issues surrounding these types of agreements.  In that vein, I have decided to draft a four-part blog series to address practical issues I have run into involving non-competition agreements.  Each part of the series is derived my experience drafting, reviewing, and litigating non-compete agreements.  I am approaching this as an issue-specific blog, meaning that I assume you know that non-competition agreements are governed by Section 15.50(a) of the Texas Business & Commerce Code which provides that “a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.”  Further, Texas Courts require two factors be met in order to enforce a non-compete agreement, which are: (1) there must be consideration, and (2) the agreement must contain reasonable limitations on time, geographical area and scope of activity to be restrained.  With that foundation in mind, Part One of this series will address the “Who, Want, When, Where, and Why” of non-compete agreements.

  • WHO: An Employer or Contractor who wishes to restrain an employee and/or independent contractor’s post-employment activities (yes, an independent contractor can be bound by a valid non-compete agreement).

 

  • WHAT: A restrictive covenant that operates to restrain an employee or independent contractor from engaging in certain post-employment activities that compete with an employer’s business.
  • WHEN: Typically negotiated in pre-employment phase and later incorporated into an employment agreement, but can be presented to an individual at any time during the employment and/or contractual relationship.
  • WHERE: All industries and professions can technically require a non-competition agreement to be signed, however, the key factor to consider is whether the scope of activity to be restrained is reasonable and does not impose a greater restraint than necessary to protect the business interest of the party seeking to restrain post-employment activity.
  • WHY: The general purpose of a non-compete agreement is to restrict the ability of employees/independent contractors from engaging in competition with against the employer/contractor after termination of the employment relationship.

Stay tuned for Part Two where I will address drafting considerations for a non-compete agreement that complies with Texas law.

Kyla Wilder

Phone: 281-367-1222

Fax: 281-210-1361

[email protected]

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