Competition is a key component of a free market economy. State and federal governments spend a lot of time and energy breaking up monopolies and targeted schemes that limit competition. However, the government also spends a lot of time and energy to ensure that this competition is fair. There is often a fine line between illegal competition limitation and illegal unfair competition.
Non-competition agreements must straddle this line. General requirements for noncompete agreements in Texas are located in the Business and Commerce Code. Most people assume written contracts are ironclad. As outlined below, that’s usually not the case, especially regarding noncompetition agreements. Most people also assume that contracts are carefully-drafted agreements with specific provisions which are easy to enforce. Also as outlined below, that’s often not true either.
We understand that people are afraid in these situations. The penalties for violating a noncompetition agreement in Texas are stiff. In addition to personal penalties, your current employer could be dragged into court as well. However, generally speaking, fear is not a rational basis for an important decision. The facts and the law in a given situation are a much more solid foundation.
Ask for Relief
The most effective way to break a non-competition agreement is also the simplest one. Frequently, employers make everyone sign non-competition agreements as a condition of employment. But, the employer doesn’t particularly care about this area. If a former employee asks for relief, there’s a good chance the boss will tear up the agreement, especially if the worker and employer had a relatively good relationship.
Furthermore, enforcing a non-compete agreement is very expensive in most cases. Many top attorneys charge $1,500 an hour. At that rate, legal fees add up quickly. Most Texas courts follow the American Rule. So, in most cases, the parties are responsible for their own attorneys’ fees. As a result, even if they think they have a case, many bosses make a business decision to release people from their noncompetition agreements.
Finally on this point, Texas noncompetition agreements are often boilerplate contracts. As a result, they often don’t hold up in court. For example, many noncompetition agreements are contracts of adhesion. These take-it-or-leave it “agreements” are often unenforceable in court. That’s especially true if, as is usually the case, the parties clearly had unequal bargaining power.
Find a Loophole
These issues don’t always apply. Some employers stick to their guns when it comes to noncompetition agreements. They are often afraid that if they let one ex-worker go quietly into that good night, they will lose control over everyone else. Furthermore, some companies have in-house lawyers who have plenty of time to legally harass former employees. Finally, just because a contract is one-sided does not mean it is a contract of adhesion.
Fortunately, we are just getting started. In addition to these overall contract issues, there are some specific issues which could invalidate a noncompetition agreement. Some examples include:
Lack of Consideration
Basically, consideration is giving something of value. For example, in employment contracts, the boss gets labor and the worker gets paid. Many noncompetition agreements have no consideration. A mere recital usually doesn’t hold up in court.
Unclean Hands: Essentially, the boss cannot ask a court to enforce a legal agreement if the boss has done something illegal. That “something illegal” could be a breach of the underlying employment contract or some unrelated shenanigans.
Overly Broad Geographically
This loophole is harder to prove now that virtual employment is becoming more common. So, all companies are theoretically in competition with all other companies. However, a line must be drawn somewhere. People have the right to pursue their chosen occupations (life, liberty, and the pursuit of happiness) as long as they don’t infringe on someone else’s rights.
No Trade Secrets
Fundamentally, businesses make people sign noncompetition agreements to protect proprietary information and trade secrets. If you had no access to such things, the noncompetition agreement is most likely unenforceable.
A noncompetition agreement cannot forbid something like future work in digital marketing or SMM (Social Media Marketing). At best, a noncompetition agreement can limit certain activities in these areas, such as digital marketing for plastic surgeons.
Generally, the burden of proof in a noncompetition bypass matter is a preponderance of the evidence (more likely than not). That’s the lowest burden of proof in Texas law. So, a little evidence goes a long way.
If you are ready to move forward in your career, let us help you.
Bret Thurman is a recovering lawyer who obtained his undergraduate degree from Baylor and his law degree from the University of Texas. He has been a full-time writer for the past decade. He currently lives in Dallas.
Editors Note: At ThriveFuel, we hate Non-Compete agreements. We believe in open competition, employees being paid what they’re worth and upward advancement. If you are interested in working for ThriveFuel but have a non-compete agreement don’t hesitate to reach out. If we are also interested in you then we will gladly pay for a qualified attorney to review your unique situation and advise you of your options with absolutely no obligation to us. It’s just part of our employee first culture..