Description

Employee Non-Compete Agreement (TX)

Employee Non-Compete Agreement (TX) Preparation Form – We recommend that you gather the information in this form prior to accessing the online questionnaire.  Doing so will help you efficiently create your custom Texas Employee Non-Compete Agreement.

Summary

This Texas Employee Non-Compete Agreement (also known as a non-compete agreement or non-compete) is intended for use by a company or other employer to limit certain competitive activities of an employee when the employment relationship ends. Employees or businesses located in Texas should use this agreement because this agreement is based on Texas law.

Details

Texas courts generally disfavor non-competes because they act as restrictive covenants that might limit an individual’s ability to earn a living. Thus, employers seeking to bind employees to non-competes must consider the possible legal challenges to enforcement in drafting the agreements. The employer should tailor a non-compete to account for the various issues that may affect enforceability, such as whether the non-compete:

• Is supported by adequate consideration.
• Is ancillary to or part of an otherwise enforceable agreement when the agreement is made.
• Meets the standards for reasonableness under state law, including that it:
  • is of a reasonable duration;
  • defines prohibited competitive activity to include only activity necessary to protect the legitimate business interests identified; and
  • is reasonably limited in geographic scope or business parameters.
• Includes provisions that supplement the restrictions on unfair or unlawful competition with additional limitations restricting:
  • the solicitation of the employer’s employees, customers, or clients; or
  • the use or disclosure of confidential information.

Special Rules for Attorneys and Medical Professionals

• Attorneys. Texas law prohibits a lawyer from offering or making an agreement restricting a lawyer’s right to practice:
  • After ending the relationship, except for an agreement about retirement benefits.
  • As part of a settlement agreement, except for a settlement of a disciplinary proceeding against a lawyer.
• Medical Professionals. Under Texas law, a licensed physician may enter a non-compete relating to the practice of medicine only if the agreement:
  • Does not deny the physician access to a list of his patients whom the physician had seen or treated within one year of the end of the employment relationship.
  • Provides the physician access to patients’ medical records with authorization of the patient and copies of those medical records for a reasonable fee set by the Texas Medical Board.
  • Specifies that any access to a list of patients or to patients’ medical records cannot require the list or records to be in a different format than as maintained except by mutual consent of the contracting parties.
  • Provides for a buy-out of the covenant:
    • by the physician at a reasonable price;
    • at the option of either party, as determined by a mutually agreeable arbitrator; or
    • in the case of an inability to agree, by a court-appointed arbitrator whose decision is binding on the parties.
  • Provides that the physician may continue treatment to a specific patient or patients with an acute illness even after the contract or employment has terminated.

However, the requirements stated above do not apply to a physician’s business ownership interest in a licensed hospital or licensed ambulatory surgical center.

Limitations of Non-Competes

Employers should understand what non-competes can and cannot accomplish. For example, non-competes can help protect against unfair or unlawful competition by former employees. However, non-competes cannot eliminate all forms of competitive activity.

Texas law disfavors non-compete agreements because they act as restrictive covenants that might limit an individual’s ability to earn a living. Therefore, employers should take additional precautions to protect their valuable resources.