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What Is a Texas Non-Compete Agreement?

In Texas, a non-compete agreement is a way for companies to prevent their employees from disclosing their trade secrets and other legitimate business interests to their competitors. Non-competition agreements give Texas employers a written employment agreement that their employees will not leak sensitive information once their employment comes to an end.

These agreements often prohibit the employee from working with a competing company for a certain period of time, working within a certain scope of activity, and similar companies within a certain geographic area. If the employee is found to have broken the agreement, they may be held liable if the former employer decides to sue. While a non-compete agreement may stand on its own as a contract, an employment contract may also have a non-compete clause or a restrictive covenant in it.

To ensure the enforceability of non-compete agreements, Texas business owners should seek legal advice from a law firm that practices employment law. Texas law is very specific about the use of these agreements. Enforceability of non-competes in Texas courts comes down to many factors such as geographical area, providing sufficient consideration to the former employee, and other reasonable limitations when having the document signed before the new job is started. An employment lawyer can help ensure that the non-compete agreement is enforceable and answer any questions the Texas business owner has about the entire process.

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Sample Texas Non-Compete Agreement

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Applicable State Laws - § 15.50-52 

In Texas, non-compete agreements protect trade secrets, confidential or proprietary information, goodwill, and special training or knowledge acquired during employment. Texas clarifies that non-compete agreements must be fair in their drafting, and not impose greater than necessary harm to the employee in its restrictions. Furthermore, these agreements must be implemented at the time of employment.

Protect your Texas business by also using a Texas non-disclosure agreement form. Download a Texas non-disclosure agreement form now! 

How to Write a Texas Non-Compete Agreement

To write a Texas non-compete agreement, first review Texas law. Include the following clauses:

  • Purpose. The clause explains the purpose of the agreement: to protect the legitimate interests of the Texas business. It also identifies the parties and the roles and provides the effective date.
  • Non-compete. This clause explains the restrictions the employee is obligated to follow. This includes the time, geographic area, general and specific business activities, working for general or specific competitors, and non-solicitation of employees, clients, and customers.
  • Time period. This clause explains when the time restriction begins, either at the beginning of the employment relationship or when it is terminated.
  • Purchase option. This clause explains whether the employer will allow the employee to buy out the contract. If this is allowed, the specific amount that must be paid by the employee is listed in this clause.
  • Jurisdiction. This clause states that Texas laws will govern the non-compete agreement.
  • Confidential information. This clause defines "confidential information" as any and all technical and non-technical information provided by the employer that includes, and is not limited to, any data or other proprietary information related to products, inventions, plans, methods, processes, developmental products, experimental products, intellectual property, software, databases, customer lists, vendor or supplier lists, marketing information, reports, business plans, financial information, or other information related to the employer or their clients, customers, or consultants that may be disclosed to the employee under the terms of the agreement.
  • Permitted disclosure. This clause explains when confidential information may be disclosed without it being considered a violation of the agreement. Examples include when the employer provides written consent to release specific information to the public, when the employee discovers information on their own without a breach of another party, or when information is released without the fault of the employee.
  • Confidentiality. This clause states that the employee acknowledges that the information they may access is confidential in nature. They agree they will not directly or indirectly communicate the information to another party without the written consent of the employer. They also agree to not use the information for any reason other than for the employer's benefit without first receiving the written consent of the employer.
  • Consultants and employees bound. This clause states that the agreement binds both consultants and employees to keep the information in the strictest of confidence. The clause also states that they are on a need-to-know basis.
  • Return of materials. This clause states that when the relationship between the parties terminates or when requested by the employer, the employee must promptly return all documents and other tangible material that represents the confidential information of the business and any copies that exist. The employer will also notify the employee upon the discovery of any loss of confidential information.
  • Remedies. This clause explains the legal remedies the employer may be entitled to pursue under Texas law if the employee violates their obligations. Examples include the recovery of court costs and reasonable attorneys' fees, the award of a Texas court of a temporary restraining order or preliminary injunction against the unauthorized use, as well as other remedies available under Texas law or as a matter of equity.
  • Choice of law. This clause states that the parties agree to choose Texas law to govern the agreement and any disputes that arise from it.
  • Entire agreement. This is the final clause of the non-compete agreement. It states that the entire agreement may only be amended in writing and only if both parties sign the amendment.

Both the employer and the employee must sign and print their names. The signatures should be dated. Each party should receive a copy of the executed non-compete agreement for their records.

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