What is a Non-Compete Agreement?
A non-compete agreement is an agreement between the employer and employee that prevents the employee from working for a competitor during, and after, employment ends. The amount of time a departing employee is restricted from competing could be as little as months, but may also be for years. If an employee signs a non-compete agreement, it will have serious consequences on future employment and the ability to earn a living. This is just one reason why you should consult with an experienced San Antonio non-compete agreements lawyer.
Are Non-Compete Agreements legal in Texas?
Yes. The Texas Business and Commerce Code, Section 15.51, 15.52 and 15.53 outline the necessary requirements for a valid non-compete agreement. As defined by the statute, a covenant not to compete must be ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent it contains reasonable limitations as to time, scope and geographic area. The statute also requires that the non-compete agreement does not impose a greater restraint than is necessary to protect the goodwill or other business interest of the company.
Physicians may also be required to comply with non-compete agreements, but such an agreement would need to provide a buy-out of the covenant at a reasonable price.
Many employees believe they have a “right to work” in Texas and non-compete agreements are not enforceable. This is a common misconception with the phrase “right to work”. Texas is a “right to work” state. This phrase relates to an employee’s ability to work in Texas, regardless of whether they are a member of a Union, or not. Therefore, Texas employees have a right to work, whether or not they belong to a Union. Therefore, although an employee in Texas has a right to work, non-compete agreements are also enforceable and legal.
Can an Employer Require the Employee to Sign a Non-Compete?
The employer may require the employee to execute a non-compete agreement to begin employment; to continue employment; or as part of a severance agreement when the employee separates employment. Before employees begin employment, an employer may provide an offer letter that outlines, among other things, the employees pay, benefits and job title, but may also contain a non-compete agreement. The employee would be required to sign the offer letter, which contained the non-compete, and would then obligate the employee not to compete after separation of employment.
Employees are also asked to sign a non-compete while employed. In such a circumstance, the employer would need to provide some form of value, or consideration, to justify the employee’s agreement not to compete. The value may simply be access to the company’s confidential information, including price lists, clients, or marketing plans. If the employee refuses to sign, the employer might, and probably would, terminate the employee because the employee refused to agree to the non-compete.
If an employee is offered a severance agreement when an employee is terminated, or separated from employment, the release attached to the severance agreement would typically contain a non-compete provision.
If the employer presents the employee a non-compete agreement, before, during or at termination, it is vitally important to have the non-compete reviewed by a San Antonio non-compete agreement lawyer that represents employees and executives.
How do Employers Enforce Non-Compete Agreements?
The first step an Employer takes to enforce a non-compete agreement is to have their lawyer, or law firm, write a demand letter to the former employee to cease and desist competition and to effectively stop working. The demand letter may also be sent the employee’s new employer, along with a statement of the non-compete provision. This creates a significant amount of stress and anxiety for the employee and potentially jeopardizes the employees’ job because the new employer does not want any part in litigation. The employer may send such a letter, even if the non-compete is later ruled overbroad or unreasonable. The damage is done to the employee—the employee would need to stop working and places the current employment in peril.
When an employee receives such a demand letter, the employee or executive should immediately consult with a Board-Certified Labor and Employment attorney to figure out how to respond to the letter. The employee should not try to handle the matter on their own—the company hired its lawyer and it would not be a fair fight. At the Law Office of Jeffrey A. Goldberg, our San Antonio non-compete agreement lawyers help employees and executives evaluate and assess the strength or weakness of the non-compete agreement, and what the appropriate response is to the cease and desist letter.
A coordinated response to the company’s demand letter is imperative. The Law Office of Jeffrey A. Goldberg understands the economic challenges facing employees and executives and the cost and expense of hiring a lawyer to respond and defend against non-compete agreements. That is why it is important to hire the right non-compete agreement lawyer in San Antonio with the skill and expertise with non-compete agreements to help resolve non-compete issues as quickly and economically as possible.
Can the Employer File a Lawsuit Against the Employee to Enforce the Non-Compete Agreement?
Yes. The employer may first send a cease and desist letter, but it may also file suit against the employee to prevent the employee from violating the non-compete agreement and working for a competitor. The first step in the litigation process is a Temporary Restraining Order, or TRO. An employer can file a TRO against the employee to immediately stop the employee from working and earning a living. A TRO may be entered against an employee and the first notice the employee may have is being served with the lawsuit.
The employer may also request a Temporary and Permanent Injunction, which is typically part of the lawsuit filed against the employee. Injunctive relief seeks to ultimately prevent the employee from permanently working with a competitor. The lawsuit may, and typically does, seek monetary damages against the employee.
The types of damages an employer may seek against the employee for violating a non-compete agreement include lost profits and lost business, as well as the employer’s legal fees. These damages could be significant and creates a significant economic impact on the employee.
The employer many times will include the employee’s new employer as one of the listed Defendants in a lawsuit against the employee. As a result, even if the employee is able to resolve the case, the employee will lose their job.
Employees Do Have Legal Defenses to Non-Compete Lawsuits
If an employer sends the employee a cease and desist letter, or files suit seeking a Temporary Restraining Order, or a Temporary or Permanent Injunction, the employee does have a number of defenses to such a claim. Those defenses include an overbroad non-compete that seeks to enforce unreasonable terms related to the time, scope and geographic limitations of the non-compete. In addition, there may be a failure of consideration that eliminates the non-compete agreement in its entirety.
Even though employees may have defenses to the enforcement of non-compete agreements, this does not stop, or prevent the employer from attempting to enforce the non-compete agreement by filing suit against the employee.
At the Law Office of Jeffrey A. Goldberg, we assist employees, executives and physicians evaluate and negotiate the non-compete agreement upon your hire, or review and analyze the enforceability of the agreement at the time of your separation of employment. Remember that San Antonio non-compete agreements can prevent you from working with a competitor for years after separation of employment. If an employer seeks to enforce a non-compete agreement, it can be time consuming and expensive.
If you need help with non-compete agreements, whether before, during or after employment, contact our firm at 210-690-2200, or contact us for a free, confidential case evaluation. Protect you and your family and contact us today.