Non Compete Agreements |

A non-compete clause is a term used in contract law under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer). Some courts refer to these as “restrictive covenants.” As a contract provision, a CNC is bound by traditional contract requirements including the consideration doctrine. The use of such clauses is premised on the possibility that upon their termination or resignation, an employee might begin working for a competitor or starting a business, and gain competitive advantage by exploiting confidential information about their former employer’s operations or trade secrets, or sensitive information such as customer/client lists, business practices, upcoming products, and marketing plans.

However, an over-broad CNC may prevent an employee from working elsewhere at all. English common law originally held any such constraint to be unenforceable under the public policy doctrine. Contemporary case law permits exceptions, but generally will only enforce CNCs to the extent necessary to protect the employer. Most jurisdictions in which such contracts have been examined by the courts have deemed CNCs to be legally binding so long as the clause contains reasonable limitations as to the geographical area and time period in which an employee of a company may not compete

Solutions:

Make out-of-state and/or out-of-country non-compete agreements void

Only apply non-compete agreements to certain management level position, salary ranges and/or certain industries

Limit non compete duration to a maximum of 6 months

Include at least 50% mandatory paid salary

Exclude employees who are 18 years of age or younger.

Exclude undergraduate or graduate students who are engaged in short-term employment

Exclude employees who are classified as non-exempt under the Fair Labor Standards Act

Texas Constitution
Code – Business and Commerce
Chapter – 15 Monopolies, Trusts and Conspiracies in Restraint of Trade
Section – 15.5 Criteria for enforceability of covenants to not compete
Section – 15.52 Preemption of other law

Washington Examiner – It’s time for states to ban non-competition agreements

The National Law Review – New Connecticut Statute Restricts Physician Non-Compete Agreements

The National Law Review – Companies on Notice as White House Releases Report on Non-Competes

The National Law Review – Utah Non-Compete Bill Passes In Scaled-Back Form

National Law Review – New Rules for Nevada Noncompetes: Nevada Companies Must Review Their Noncompete Agreements

Brookings – Leveling the playing field for workers by reforming non-competes

Slate – Ban Non compete Agreements. Do It Now

EPI – The White House attacks the spread of abusive non-compete agreements

Vox – How the White House wants to make the rest of the country more like Silicon Valley

Vox – Job hopping helped Silicon Valley thrive. So why do other states restrict it?

Wall Street Journal – Litigation Over Non compete Clauses Is Rising

Wall Street Journal – Noncompete Agreements Hobble Junior Employees