For
non-compete agreements to be to be binding in Texas, there are specific terms
that must be included and conditions that must be satisfied.
Section
15.50(a) of the Texas Business & Commerce Code provides:
A non-compete must be “ancillary to or part of
an otherwise enforceable agreement at the time the agreement is made”; and
The agreement must contain “limitations as to
time, geographical area, and scope of activity to be restrained that are
reasonable and do not impose a greater restraint than is necessary to protect
the goodwill or other business interest of the promise.”
This
provision has been interpreted to require the following:
First,
the contract in which the non-compete agreement is contained or is ancillary to
must be valid and legal to make it enforceable.
Second,
that any agreement for a non-compete requires independent compensation for that
agreement. The compensation can be
monetary or specific training or access to proprietary information, but must be
determinable from the contract.
And
third, the restrictions on the non-compete must be reasonable in duration and
scope. It has been determined that a
two year term is reasonable, but that longer usually is not. The area covered should not exceed 100 miles
in order to be reasonable and the scope of the restriction must be specific as
to what the person bound can and cannot do – and must (again) be reasonably
related to the scope of the employment or the business being conveyed.
All
determinations under this provision are fact specific and each situation must
be evaluated independently. But a full
and specific listing of the restrictions, which are reasonable in scope and
agreed by the parties, will usually pass muster.
By Maura
Phelan
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