5 Things to Consider About Non Compete Agreements in Dallas
Aspiring Business Lawyers in Dallas: Understanding Non-Compete Agreements3 min read
Aspiring business lawyers in Dallas need to be familiar with the nuances of non-compete agreements, whether they are drafting these documents or representing a client seeking to enforce them. The legal landscape governing these popular contracts varies across the nation, making it more important than ever for attorneys to have a firm grasp of their local regulations if they plan on taking on non-compete cases. This article will provide a brief overview of the top five things Dallas business lawyers must consider when tackling non-compete issues.
Non-compete agreements are primarily used to protect employer’s confidential information and trade secrets from competitors. In exchange for access to certain information or skills, the employer provides the employee with a financial or employment incentive, such as a salary or benefits. Generally speaking, a non-compete clause prohibits an employee from working for or establishing a competing enterprise after leaving their current job.
Not all states are equally lenient towards non-competes, and Texas falls into the latter group. Texas is a ‘reasonableness’ state when it comes to non-competes, meaning that employers’ enforcement rights are limited by what is considered a “reasonable” restriction. Thus, business lawyers practicing in Dallas must be familiar with two intertwined legal theories: the Restraint of Trade Rule (which governs non-compete agreements, and the Status Quo Rule (which seeks to protect employees from unreasonable agreements).
The first thing Dallas business lawyers need to understand is the three criteria that must be met for a non-compete agreement to be valid in the state:
1. Legality: Non-competes, like any other contract, must abide by state and federal laws. To be legally valid, a non-compete must not limit an employee’s ability to perform their trade or profession, or interfere with public welfare.
2. Relevance: A non-compete agreement must be relevant to the job being performed, and it must only put restrictions on future employment activities.These agreements cannot be used to prevent employee mobility in other non-related fields.
3. Necessity: Finally, the non-compete agreement must be reasonably necessary to protect a legitimate business interest. The agreement must also be limited in both scope and time to cover one legitimate, specific business interest.
The second consideration Dallas business lawyers must take into account is the enforcement mechanism for non-compete agreements. In general, the contract will include a promise that, should the employee breach the terms, they will immediately pay a specified fee or provide some other financial damages. This is meant to compensate the employer if they lose business due to the employee’s breach. However, in Texas, if the employer believes the employee breached the terms of the contract, they may only make the employee pay a “reasonable” fee, as determined by the court.
Moreover, Dallas business lawyers should be aware that non-compete agreements can be voided for various legal reasons, some of which are outlined in the Texas Covenants Not to Compete Act. For instance, if an employer terminates the employee without good cause, the agreement becomes null and void. Similarly, if the company fails to live up to its end of the contract, an employee may also be released from their obligations.
Finally, Dallas business lawyers should have a comprehensive understanding of what types of activities are prohibited in non-compete clauses. Generally speaking, these agreements are used to prevent an employee from doing any of the following: engaging in a competing business in the same geographic area or market, soliciting the employer’s customers, or soliciting the employer’s personnel.
Dallas business lawyers need to be intimately familiar with the nuances and regulations of non-compete agreements if they plan on taking on such cases. Employers need to be aware of the three necessary criteria for a valid non-compete agreement, the legal options they have to enforce the contract, and the activities that may constitute a breach of the contract. With the right knowledge and proper understanding, Dallas business lawyers can ensure the terms of the non-compete agreement are legally enforceable, thereby protecting their client’s confidential information.
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