October 23, 2023

Steps To Drafting Enforceable Non-Compete Agreements In Texas

You’ve nurtured your business from a fledgling startup to a robust enterprise. Your team is the backbone of this success, but what happens if a key employee decides to work for your competitor or start a rival company? In the complex landscape of business law, this is where Non-Compete Agreements (NCAs) step in. However, getting an NCA that stands up in court is not as straightforward as it seems, especially in a state like Texas with specific regulations. 

This blog guides you through the maze of drafting enforceable NCAs with a focus on Texas laws. And if you’re looking for experienced attorneys who can help you navigate this intricate process, Villeda Law Group is just a call away.

Step 1: Understanding the Basics

A non-compete agreement is a contract between an employer and an employee that restricts the employee from competing with the employer for a certain period of time after leaving the company.

In Texas, the law mandates that an NCA should be ancillary to or part of another enforceable agreement. This essentially means that the NCA should not stand alone but be a part of an existing contractual relationship like an employment contract or a partnership agreement. This foundational agreement should have its own value and enforceable commitments from both parties.

The NCA must contain specific limitations concerning time, geographical area, and scope of activity that are considered reasonable (Tex. Bus. & Com. Code Ann. § 15.50). For instance, preventing a sales representative from working in a specific industry for two years might be acceptable, but restricting them from working in any sales capacity anywhere in the United States might be deemed unreasonable. Knowing these basic guidelines can save you time and legal headaches.

Importance of Reasonableness

The crux of an enforceable NCA is its reasonableness. This reasonableness test is subjective and depends on various factors such as the nature of the business, the employee’s role, and the market reach. If the terms are too restrictive, a court may either modify them or declare the agreement unenforceable (Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642, 644-45 [Tex. 1994]).

Step 2: Consulting an Attorney

A DIY approach may seem tempting, but business law is not a field for improvisation. Consulting a qualified attorney is crucial. At Villeda Law Group, we’ve helped numerous businesses draft comprehensive and enforceable NCAs. Our business attorneys in McAllen, Texas, have the local expertise and practical experience to ensure your NCA meets the specific requirements of Texas law.

Step 3: Being Specific and Clear

Define the Scope. Clearly outline what the employee can and cannot do after leaving your company. The scope should be tightly related to the kind of work the employee did for you.

Set Reasonable Duration and Geographical Limits. A time duration of six months to two years is generally considered reasonable for most roles. As for the geographical area, it should be limited to where your company actually does business. Overreach can make the agreement unenforceable.

Put It In Writing. An enforceable NCA must be written and signed by both parties. Additionally, consider having it reviewed periodically, especially if your business undergoes significant changes.

Seek Mutuality. An NCA must not only protect the employer’s interest but also take into account the employee’s ability to earn a living. Courts are less likely to enforce an NCA that puts an undue burden on the employee (Peat Marwick Main & Co. v. Haass, 818 S.W.2d 381, 387 [Tex. 1991]).

Need Help with Non-Compete Agreements?

Enforceable Non-Compete Agreements are a crucial asset in safeguarding your business interests. It’s not just about stringing legal terms together but about crafting an agreement that stands up to legal scrutiny. Villeda Law Group offers personalized, practical solutions for these complex matters. Our business lawyers in McAllen, TX, are proficient in translating your business needs into a legally sound NCA.

Don’t leave the future of your business to chance. Secure it with a robust Non-Compete Agreement tailored to meet the specific legal requirements of Texas. Contact Villeda Law Group today to safeguard your business tomorrow.

Ready to draft an enforceable NCA? Reach out to Villeda Law Group and let our seasoned attorneys in McAllen, TX guide you through every step.