What is a “Non-Compete” Agreement?

Non-Compete Agreement Dan Burke

Though we might all be guilty of not reading Terms and Conditions in its entirety, it’s still important to understand exactly what you’re agreeing to by signing any dotted lines. One common form that employees may encounter is a non-compete agreement, and it’s crucial to know all the strings that are attached.

San Antonio small business attorney Dan Burke prides himself on explaining his law strategies to his clients in a straightforward, professional way that keeps them at the center of the whole process.

A non-compete agreement (also known as a ‘non-compete clause’ or a ‘covenant not to compete’) is a legally binding contract in which an employee agrees to abstain from going to work for a competitor after the end of employment with their current company. If you work for Coca Cola now but leave the company, you can’t immediately go work for Pepsi.

When is a Non-Compete Agreement Presented?

If you’ve ever started the process of being hired at a new job, the HR department will almost always have you sign what’s known as a non-disclosure agreement (NDA). Companies have all onboarding employees sign this contract to ensure that the employee agrees to their legal duty to uphold the privacy of company ideas and information.

While an NDA is standard in most businesses, a non-compete contract may also be enforced during the hiring process depending on the location of your new job. While you have the right to refuse to sign this document, the company may also uphold their right to terminate or choose not to hire you.  

Are Non-Compete Agreements Enforced in Texas?

The use of these contracts are geographical. Some states enforce non-compete clauses, while others believe it sets unnecessary limitations on members of the job market. 

In the state of Texas, noncompetes are enforced as long as they meet certain requirements. They can be upheld in Texas as long as the agreement is supported by valid consideration and is reasonable in:

  • Time
  • Geographic scope
  • Activities to be restrained

Legal action may be placed on any non-compete agreement that fails to meet these requirements in Texas.  

Why Do Companies Use Non-Compete Agreements?

While this contract might present a disadvantage to employee mobility, employers have these clauses in place for a reason. They present an extra layer of protection (on top of an NDA) of their secret company information and ideas from being used by a competing entity. 

This contract also prevents companies from losing valuable assets to their team to a competing company, even if the competing company offers the employee a better promotion or salary. 

What Can Happen If You Were to Break a Non-Compete Agreement?

Serious consequences may be faced if this contract is not upheld by the signee. The standard repercussion for an employee who breaks the agreement is a lawsuit filed by their employer. This may include stopping you from participating in competing activities that violate the clause and requesting financial compensation. 

If you are experiencing concerns about signing a non-compete contract, contact the Texas small business law extraordinaire, Dan Burke, for a consultation.

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