The world of corporate business can be a complex one, and one of the most confusing elements of it are non-compete clauses. This article is designed to provide comprehensive guidance to those in the Dallas area looking for counsel that understand local regulations when it comes to non-compete clauses. With the right advice and consultation, you will be able to navigate this confusing terrain safely, to the benefit of your business and yourself.

A non-compete clause (NCC) is a contractual provision in which the individual agrees not to enter the same market as the company for a given period of time, typically a few months to a few years. The clause is usually restricted to a specific geographical area, or it may be global. In addition, the NCC typically restricts activities such as investment, venture funding, and consulting. The purpose of the NCC is to protect the company's confidential information and intellectual property, to prevent poaching of any kind, and to reduce the competition in the marketplace.

When considering the use of NCCs, it is important to consider the following five factors:

1. Enforceability

The first factor to consider is whether or not the clause is enforceable. For an NCC to be enforceable, it must be reasonable in terms of its duration, geographic scope, and activities that are restricted. Generally speaking, the shorter the period of time of the clause, the more likely it is to be enforceable. Be aware, however, that some states have statutes that completely prohibit the use of NCCs.

In Texas, for example, non-compete clauses are enforceable as long as they are reasonable. This means that an NCC must be based on a legitimate business interest, such as protecting trade secrets or confidential information. The NCC must also be reasonable with regard to the duration, geographic scope, and restricted activities.

2. Types of Clauses

The second factor to consider is the type of NCC that you want to use. There are several different types of NCCs, including:

• Restricted Contact: This type of NCC forbids the employee from contacting the company's current or prospective customers, clients, employees, vendors, or competitors.

• Non-Solicitation: This type of NCC prohibits the employee from attempting to persuade or induce other employees or customers to leave the company.

• Non-Compete: This type of NCC strictly prohibits the employee from engaging in any form of competition with the company.

3. Enforcement

The third factor to consider is how the NCC will be enforced. Generally speaking, companies have two options: litigation or arbitration. Litigation is often expensive and time-consuming, and it involves a full trial that may not be worth the cost. On the other hand, arbitration is usually a more cost-effective and quicker option, and it is not a public event, making it more confidential.

4. Considerations in the Agreement

The fourth factor to consider is the contents of the agreement itself. When drafting the agreement, consider the following aspects:

• Definition of terms – be sure to clearly define all terms, such as “competition” and “reasonable scope.”

• Receipt and acknowledgement – make sure that the receipt and acknowledgement of the NCC is stated in the agreement.

• Entire agreement – make sure that the NCC is the only agreement between the parties, and that it supersedes all other agreements.

• Force majeure – this clause should be included in the agreement in the event of force majeure events, such as acts of God, natural disasters, etc.

5. Legal Representation

The fifth and final factor to consider is legal representation. It is highly recommended that you seek legal counsel from a Dallas-based attorney who is well-versed in NCCs before drafting or signing an agreement. This is especially important if the NCC is to be enforced in multiple states with different laws. An experienced attorney can help you navigate the complexities of the law and ensure that the NCC is legally binding and enforceable.


Non-Compete Clauses,


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