If your boss is a tyrant, then quitting your job feels great, even if it means you must go through the stress and uncertainty of a new job search. You hand over your company-issued phone and computer and ride off into the sunset, where your work can no longer micromanage you, even during your time off. Of course, maybe it is not that simple. Non-compete provisions in your employment contract could make it legally possible for your former employer to restrict your activities even after the employment relationship has ended. The good news is that there is an increasing sentiment among lawmakers that most non-compete agreements are unfairly restrictive, so their use is becoming less common, and their scope is becoming more limited. The Houston hostile work environment lawyers at HKM Employment Attorneys LLP can help you decide whether to sign a non-compete agreement in its current form and can represent you in disputes arising from non-compete agreements that you have already signed.
What is a Non-Compete Agreement?
A non-compete agreement can be a free-standing document or a provision of an employment contract. It states that, during the employment relationship and for a certain period of time after the employment relationship ends, the employee does not have the right to establish a new business that competes directly with the employer. Non-compete agreements also bar the employee from taking a job with an already established business that is a direct competitor to the employer.
Non-compete agreements are not exactly the same as non-disclosure agreements (NDAs), but they serve a similar purpose. NDAs prohibit employees and business associates from revealing to third parties confidential information shared between the parties to the NDA in the context of their professional relationship. They do not limit the future employment opportunities of either party to the agreement.
Why Do Employers Use Non-Compete Agreements?
Employers ask employees to sign non-compete agreements because the employers want to reduce the risk that the employees will use the knowledge and skills they gained while working for the employer in ways that harm the employer’s financial interests. It varies on a case-by-case basis whether the non-compete agreement is really necessary. Non-compete agreements are most appropriate for employees who worked in high-ranking positions where they gained knowledge of the employer’s trade secrets and future plans which no one outside the company, and even most people employed by the company, did not know.
Client lists are a motivation for some non-compete agreements. In other words, the agreement might allow the employee to set up a business that provides services similar to what the employer provides, but the employee is not allowed to solicit clients that previously had a relationship with the employer. In other words, non-compete agreements can prevent client poaching.
Are Non-Compete Agreements Enforceable?
If a former employee violates the terms of a non-compete agreement, the former employer has the right to sue the former employee for damages. The damages can be equivalent to the amount of financial losses that the employer suffered because of the employee’s actions. In practice, litigation over breaches of non-compete agreements is rare. Lawsuits are time-consuming and expensive, and it is rarely worth the effort of going to court to recover the financial losses you suffered because of the actions of one former employee. Even worse, employers who sue former employees over non-compete agreements get a lot of negative publicity.
At their best, non-compete agreements prevent former employees from taking everything they learned at their previous job and using it to the detriment of their former employer. At their worst, they simply intimidate employees out of quitting their jobs for fear that their employers will sue them if they get a new job in the only career field in which they have specialized training. In other words, employers sometimes use non-compete agreements as a way of saying, “You’ll never work in this town again.” For example, it is obviously unfair to ask a dental hygienist to sign a non-compete agreement promising that, if she stops working for you, she will wait two years before seeking other employment as a dental hygienist in the Houston metropolitan area. The more specific a non-compete agreement is, the more likely a court is to enforce it. At a minimum, it should specify what the employee is not allowed to do and where and when the employee is not allowed to do it.
Is the Tide Turning Against Non-Compete Clauses?
In recent years, workers and lawmakers have begun to see non-compete agreements as a way for corporations to bully their employees. In 2020, approximately 20% of employment contracts governing ongoing employment relationships where the employee did not have a bachelor’s degree included non-compete provisions. Clearly, these jobs were not specialized enough that it would pose a danger to the employer if the employee later worked for one of the employer’s competitors. In other words, the effect of non-compete agreements was to discourage business competition and to make it harder for workers to seek out better salaries and working conditions after gaining experience in their career fields.
In 2021, President Biden issued an executive order instructing the Federal Trade Commission to investigate the unnecessary use of non-competes and overly restrictive provisions and impose financial penalties on companies that used non-competes to unfairly restrict workers’ employment options. Some states have even enacted legislation that discourages or outright bans the use of non-compete clauses in employment contracts. In Texas, it is legal for employers to include non-compete provisions in employment contracts, but the provisions must be specific with regard to time and geography and must not be unfairly restrictive. If the non-compete clause in the contract is the only reason you are hesitating to accept a job offer, you should work with a lawyer to negotiate different terms for the non-compete provisions.
Contact HKM Employment Attorneys, LLP About Non-Compete Clauses
The Houston employment lawyers at HKM Employment Attorneys, LLP can help you resolve disputes related to non-compete provisions in your employment contract. Contact the employment lawyers at HKM Employment Attorneys LLP in Houston, Texas, to set up a consultation.