United States: Some Of What You Should Know About Employee Non-Compete Agreements

Last Updated: December 12 2016
Article by Carlos R. Soltero and Stephanie Duff-O’Bryan

If you're in the high-tech industry, you already know that Austin is one of the hottest marketplaces for technology companies, big and small, from industry leaders to startups. Between 2001 and 2013, Austin's technology industry grew by 41.4%. The city currently leads the nation in startup activity, and is home to more than 4,700 hi-tech companies. As of a year ago, the Austin Technology Council predicted that 11,754 new tech jobs would appear within five years. With new growth comes new opportunity. But with this growth also comes competition, including competition for the best employees, who frequently receive numerous unsolicited job offers each month.

Many Austin employers realize that to guard their profits, they must guard their talent. Hence the rise of the non-compete agreement—an employment contract that limits the employee's ability to go work for a competitor. If you work in the tech industry, chances are high that you've either signed a non-compete agreement, or will be asked to sign one in the future.

Here is some of what you need to know about these agreements:

In Texas (unlike in states like California and Oklahoma), well-drafted non-compete agreements tend to be enforceable. Texas courts apply certain tests when determining whether a particular non-compete agreement is enforceable.

First, any employee's promise not to compete must be "ancillary to or part of an otherwise enforceable agreement." Simply put, this means an employer must, in exchange for the employee's promise not to compete, provide some type of new "consideration" (compensation) to the employee that is designed to enforce the employee's return promise not to compete. The consideration can take the form of more money, stock options, specialized training, or providing the employee with confidential and proprietary information. This additional consideration does not have to be received by the employee at the time the documents are signed. Second, the agreement not to compete must be reasonable and cannot be overbroad. This means that the agreement must not impose a greater restraint on the employee than is actually necessary to protect the employer's goodwill or business interest. Generally, restrictions on an employee's ability to compete must be limited (a) by geographic area (to a specific identifiable area) and/or by customer base in certain circumstances, (b) by a specific period of time (it can't be indefinite), and (c) in scope of prohibited activities. Because non-competes must not be broader than necessary to protect the employer's interests, what might be reasonable for one company could be overly protective when imposed by another.

When negotiating and drafting non-compete agreements, vigilance is required on both sides of the employer-employee equation to ensure the agreement is properly tailored and reasonable. On the one hand, if an employer attempts to enforce what turns out to be an overly broad agreement, it might lose out on recovering damages that may have otherwise been available with a more narrowly drafted agreement in a lawsuit against a departed employee. But on the other hand, an employee who haphazardly signs a non-compete agreement might arguably, by virtue of the employer's initial inclusion of certain stipulations in the agreement, waive a future defense that the agreement was overbroad and unenforceable.

And then there's "TUTSA," the Texas Uniform Trade Secrets Act:

An employee who is contemplating a new opportunity must consider more than simply whether he or she is governed by a non-compete agreement. Under the Texas Uniform Trade Secrets Act (TUTSA), a former employer can also bring an action against an ex-employee if it appears the employee has taken trade secrets belonging to the former employer. And if the employee brings a trade secret to a new employer and the new employer should have known the trade secret was acquired by improper means, then the new employer may be liable for damages under TUTSA, as well.

These cases can become complex, in part because what constitutes a "trade secret" is frequently subject to dispute. A trade secret is more than just a special formula, but it does not include every piece of information gained during the employment relationship, and the trade secret status of certain information may be inadvertently waived by the employer in a number of ways, including by public disclosure. Due to the complexity of these cases, rather than taking the risk of exposure and litigating a case to the bitter end, some new employers will simply terminate a recent hire at the first sign of real trouble.

The Rodeo:

Finally, lawsuits brought in the wake of an employee's departure frequently progress on a very fast track. The employer can show up at a courthouse with little or no notice to the employee and obtain a temporary restraining order ("TRO") that prohibits the employee from violating the non-compete and/or taking trade secrets. Within fourteen days, the court must hold an evidentiary temporary injunction hearing (a mini bench trial) to determine whether the court should put a longer temporary injunction in place. If ordered, the temporary injunction will prevent the employee from engaging in certain behavior until a full trial on the merits can be had, which could take up to a year or more. The first few weeks leading up to a temporary injunction hearing are often intense and invasive, and in the modern internet era frequently involve requests to image personal and work computers and cell phones, followed by the parties sifting through and identifying documents or communications containing potentially confidential or proprietary information.

But the landscape is not all bleak. With the help of good counsel and strategic planning, employees can and should feel able to seize new employment opportunities, and employers can and should feel confident in continuing to hire and recruit top talent. While the level of acrimony associated with these types of business separations often resembles that seen in bitterly contested divorces, these are party and case specific, and generally can be handled an "easy way" or a "hard way," with many variations in between. All parties should proceed with their eyes wide open and diligently protect their interests, including by getting advice from well-qualified counsel, knowing that proper planning can make a contemplated transition more successful and less stressful.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Duane Morris LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Duane Morris LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions