Non-Compete Agreements

Non-Compete Agreements & Enforcement in Texas

When an employee leaves for a competitor, the situation requires careful legal analysis. While time is often a factor in these matters, each case must be properly evaluated to determine the appropriate response. Non-compete disputes involve complex questions about enforceability, reasonable restrictions, and strategic options.

Mark Alexander has spent over 20 years on both sides of non-compete disputes. We’ve handled temporary restraining orders, defended employees against overreaching restrictions, and helped businesses protect their legitimate interests through enforcement of reasonable agreements. Whether you need to enforce a non-compete agreement or defend against unreasonable restrictions, we bring the expertise and strategic thinking these cases demand.

The Texas Non-Compete Landscape

Texas takes a unique approach to non-compete agreements. Understanding non-compete agreements in Texas requires knowledge of both statutory requirements and case law precedent. Unlike California, which generally prohibits them, or states that freely enforce them, Texas occupies a middle ground with specific statutory requirements that make enforceability a complex question. The Texas Business and Commerce Code Section 15.50 reformed non-compete law, but courts continue to refine what’s enforceable and what crosses the line.

Critical Reality: Texas courts will enforce reasonable non-compete agreements, but they must be ancillary to or part of an otherwise enforceable agreement at the time the agreement is made.” This seemingly simple requirement has generated thousands of pages of case law and continues to evolve. Getting it right requires not just knowing current law but anticipating how courts will apply it to your specific situation.

The stakes couldn’t be higher. For employers, a key employee joining a competitor can mean lost customers, disclosed trade secrets, and competitive disadvantage. For employees, an overly broad non-compete can mean unemployment, career disruption, and financial hardship. Both sides need attorneys who understand not just the law but the business realities and human costs involved.

Enforceable Non-Compete Agreements in Texas

The Three-Part Test for Enforceability

Texas courts evaluate non-compete agreements using a three-part test to determine enforceability.

1. Ancillary to an Otherwise Enforceable Agreement Non-compete agreements must be ancillary to or part of another valid agreement. But not just any employment will suffice. At-will employment alone doesn’t support a non-compete. There must be additional consideration like confidential information, specialized training, or stock options. The Supreme Court’s decision in Marsh USA v. Cook clarified that the consideration must give rise to an interest worthy of protection.
2. Reasonable in Time and Geographic Scope What’s reasonable depends on industry, position, and protected interests. For a salesperson with local customers, six months in a single city might be reasonable. For a CEO with national responsibilities and strategic knowledge, two years nationwide might be justified. Courts can reform overbroad restrictions, but recent cases show increasing willingness to void unreasonable agreements entirely.
3. Not Greater Than Necessary to Protect Legitimate Business Interests The restriction must be tailored to protect specific interests—customer relationships, confidential information, specialized training, or trade secrets. Blanket prohibitions on competition without corresponding protectable interests fail. The analysis is fact-intensive and requires detailed understanding of the business, position, and competitive landscape.

Common Pitfalls That Void Non-Competes

Many non-compete agreements fail due to common drafting errors and technical deficiencies.

Illusory Promises: If the employer can terminate the agreement or withdraw consideration at will, the agreement may be illusory. For example, promises to provide confidential information “if any” or that can be revoked anytime often fail.

Industry-Wide Prohibitions: Agreements that effectively prevent someone from working in their profession anywhere in Texas typically fail as unreasonable restraints on trade.

Retroactive Agreements: Non-competes signed after employment begins require new, independent consideration. Continued employment alone isn’t sufficient consideration in Texas.

Physician Non-Competes: Texas has special rules for physician non-compete agreements, including buyout provisions and patient access requirements. Healthcare entities must carefully navigate these additional requirements.

Trade Secret Protection Under Texas Law

What Qualifies as a Trade Secret?

The Texas Uniform Trade Secrets Act (TUTSA) defines trade secrets broadly but requires meeting specific criteria:

Independent Economic Value: The information must derive actual or potential economic value from not being generally known to others who could obtain value from its disclosure or use.

Reasonable Efforts to Maintain Secrecy: You can’t claim trade secret protection for information you don’t protect. This requires:

• Physical and electronic security measures
• Confidentiality agreements with those who access it
• Limited distribution on need-to-know basis
• Clear marking as confidential
• Exit procedures to ensure return

Not Readily Ascertainable: Information that can be reverse-engineered, independently developed, or found through public sources isn’t protected. The secret must provide genuine competitive advantage.

Common Trade Secrets We Protect

Customer Information: Customer lists are classic trade secrets when compiled through effort and expense. But merely listing publicly available customers isn’t protected—the list must include non-public information like buying habits, pricing, key contacts, or preferences.

Technical Information: Formulas, processes, methods, techniques, and know-how developed through research and investment. This includes manufacturing processes, software algorithms, chemical formulas, and engineering specifications.

Business Information: Strategic plans, marketing strategies, pricing models, cost structures, supplier relationships, and expansion plans. Information about future products, merger discussions, or strategic initiatives often qualifies.

Negative Know-How: Knowledge of what doesn’t work, failed approaches, and dead ends has value. Competitors benefit from avoiding your costly mistakes.

Misappropriation and Remedies

TUTSA provides powerful remedies for trade secret misappropriation:

Injunctive Relief: Courts can enjoin actual or threatened misappropriation. In exceptional circumstances, injunctions can condition future use on payment of reasonable royalties. The recently amended TUTSA clarifies that injunctions can protect against both actual and inevitable disclosure.

Damages: Actual damages plus unjust enrichment not captured in actual damages. Alternatively, reasonable royalty for unauthorized use. For willful and malicious misappropriation, exemplary damages up to twice other damages.

Attorney’s Fees: Available to prevailing party if misappropriation or claim of misappropriation is willful and malicious, or made in bad faith.

Seizure Orders: The Defend Trade Secrets Act (federal law) allows ex parte seizure orders in extraordinary circumstances—powerful but rarely granted.

Emergency Relief: When Hours Matter

Enforcing non-compete agreements often requires emergency court action when violations are discovered.

The 24-Hour Action Plan

When discovering potential non-compete violations or trade secret theft, immediate action is critical:

Hour 1-2: Initial Assessment

• Document the threat (resignation emails, suspicious activity)
• Identify at-risk information and relationships
• Gather employment agreements and policies
• Contact legal counsel immediately

Hour 2-6: Evidence Preservation

• Forensic imaging of company devices
• Email and file access audit
• Customer contact documentation
• Preserve security footage and access logs

Hour 6-12: Legal Strategy

• Draft temporary restraining order application
• Prepare supporting affidavits
• Compile exhibits
• Identify irreparable harm

Hour 12-24: Court Filing

• File TRO application
• Arrange for service
• Prepare for emergency hearing
• Notify insurance carriers

Temporary Restraining Orders (TROs)

Texas courts can issue TROs without notice to prevent irreparable injury. Requirements include:

• Verified petition stating specific facts
• Irreparable injury, loss, or damage
• No adequate remedy at law
• Likelihood of success on merits
• Bond to cover potential damages

TROs last maximum 14 days but can be extended once. The goal is maintaining status quo until a preliminary injunction hearing where both sides present evidence.

Preliminary and Permanent Injunctions

After TRO expiration, preliminary injunction hearings determine whether restrictions continue during litigation. These mini-trials involve witness testimony, document evidence, and legal argument. Standards include:

• Probable right to relief
• Probable, imminent, and irreparable injury
• Balance of equities favors injunction
• No adequate remedy at law

Preliminary injunctions can last throughout litigation. Permanent injunctions follow trial victory, potentially lasting years.

Defending Against Non-Compete Claims

Employee Rights and Defenses

Not all non-compete agreements are enforceable, and employees have significant rights and defenses. Common defenses include:

Agreement Defects: Many non-competes fail technical requirements. Missing consideration, illusory promises, or procedural failures can void agreements.

Unreasonable Restrictions: Overbroad time, geography, or scope restrictions may invalidate entire agreements or justify reformation.

Prior Breach by Employer: If the employer materially breached first—unpaid wages, commissions, or wrongful termination—the non-compete may be unenforceable.

No Legitimate Business Interest: Without trade secrets, confidential information, or specialized training, there’s nothing to protect.

Public Policy: Restrictions that effectively prevent someone from earning a living in their profession may violate public policy.

Strategic Defense Approaches

Preemptive Strikes: When expecting enforcement action, filing declaratory judgment in favorable venue can shift battlefield advantage.

Negotiated Resolutions: Many non-compete disputes resolve through negotiation—geographic carve-outs, shortened time periods, or transition agreements.

Blue Pencil Requests: Ask courts to reform overbroad agreements rather than enforce them as written. Texas courts can modify unreasonable restrictions.

Competition Without Violation: Often employees can compete without violating agreements—different geographic areas, different services, or different customer segments.

Industry-Specific Considerations

Technology and Software

Tech industry non-compete agreements face unique challenges in rapidly evolving markets. Rapid innovation means two-year restrictions might cover multiple product generations. Open source development complicates confidentiality. Remote work makes geographic restrictions meaningless. We help tech companies craft enforceable restrictions and defend employees against overreach.

Oil and Gas

Energy industry employees often have access to extremely valuable geological data, lease information, and strategic plans. Non-competes must account for specialized roles—landmen, geologists, engineers—and boom-bust cycles affecting reasonableness. We understand the unique aspects of energy industry competition.

Healthcare

Texas has special statutes for physician non-competes, including buyout provisions and patient access requirements. Healthcare facilities must balance recruitment needs with protection of referral relationships and patient bases. We navigate these complex requirements for both providers and facilities.

Sales and Professional Services

Sales professionals present unique challenges. Customer relationships developed through personal effort may not be protectable. But customer information, pricing, and strategic knowledge often are. We help distinguish between protectable interests and general sales skills.

Financial Services

Financial advisors, brokers, and bankers often sign complex agreements involving FINRA rules, Broker Protocol, and federal regulations. Client lists and investment strategies are valuable but subject to customer choice doctrine. We understand the regulatory overlay affecting financial services non-competes.

Proactive Protection Strategies

For Employers

Well-drafted non-compete agreements tailored to specific positions and industries are more likely to withstand legal challenges.

Well-Drafted Agreements: Don’t rely on generic forms. Every non-compete should be tailored to specific positions, industries, and protectable interests. What works for executives may fail for sales staff.

Consistent Implementation: Selective enforcement weakens all agreements. Develop consistent policies for when and how to enforce restrictions.

Exit Procedures: Robust exit interviews, return of property, and reminder letters create evidence and deter violations. Document everything.

Early Warning Systems: Monitor for signs of impending departure—unusual downloads, customer contacts, or recruiting activity. Early detection enables strategic response.

Trade Secret Audits: Regularly identify and document trade secrets. You can’t protect what you can’t identify. Update protections as information evolves.

For Employees

Pre-Employment Review: Have agreements reviewed before signing. Negotiating reasonable terms upfront beats fighting unreasonable restrictions later.

Document Your Contributions: Keep records of customer relationships you brought, innovations you developed, and value you added. This evidence helps in disputes.

Clean Departure: Return all company property, don’t take documents, and avoid customer contact during restricted periods. Clean departures reduce enforcement likelihood.

New Employer Coordination: Ensure new employers understand your restrictions. Indemnification agreements and careful role definition can enable employment within bounds.

The Cost of Getting It Wrong

For Employers

• Lost customers worth millions
• Disclosed trade secrets destroying competitive advantage
• Competitor access to strategic plans
• Damaged employee morale from departures
• Legal fees for enforcement actions

For Employees

• Inability to work in chosen profession
• Legal fees for defense
• Potential damage awards
• Career disruption and reputation harm
• Personal financial stress

Real-World Enforcement

Non-compete and trade secret disputes often involve complex factual and legal issues. Texas courts regularly enforce reasonable non-compete agreements that protect legitimate business interests, while also protecting employees from overreaching restrictions that unfairly limit their ability to earn a living. The enforceability of non-compete agreements depends heavily on the specific facts of each case and the reasonableness of the restrictions imposed.

Mark Alexander has over 20 years of experience handling these disputes from both sides, understanding the strategic considerations and legal requirements involved. Whether pursuing enforcement or mounting a defense, these cases require careful analysis of the agreement terms, the parties’ conduct, and Texas law requirements.

Frequently Asked Questions

Take Immediate Action

Whether you’re an employer discovering a threat to your business or an employee facing enforcement action, time is critical in non-compete and trade secret cases. Days or even hours can determine whether information is protected, relationships preserved, and careers maintained.

Mark Alexander brings 20+ years of experience in urgent commercial litigation with the responsiveness these cases demand. We understand that business threats require swift action and make ourselves available for urgent matters.

For Employers: When you discover a threat to your business, swift action is essential. Contact us immediately to discuss emergency relief options and protect your competitive advantage.

For Employees: Don’t assume your non-compete is enforceable or that you have no options. Strategic response can often enable career advancement within legal bounds.