Texas Employment Law: Covenants Not To Compete

Under Texas law “a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.” Tex. Bus. & Com. Code Ann. § 15.50(a).

There are special rules relating to doctors. To be enforceable, a covenant not to compete relating to the practice of medicine must “not deny the physician access to a list of his patients whom he had seen or treated within one year of termination of the contract or employment” and “provide access to medical records of the physician’s patients upon authorization of the patient.” The covenant not to compete must also provide for a buyout and that “the physician will not be prohibited from providing continuing care and treatment to a specific patient or patients during the course of an acute illness even after the contract or employment has been terminated.” Tex. Bus. & Com. Code Ann. § 15.50(b).

Remedies In Actions To Enforce Covenants Not To Compete In Texas

If the person against whom the covenant is meant to be enforced breaches, the promisee (employer) is entitled to damages, injunctive relief or both.

If the primary purpose of the non-compete agreement is to render personal services, then the promisee has the burden of establishing that the legal requirements for such an agreement (reasonable as to time, geographical area and scope of activity) have been met. For all other agreements, it is the promisor (employee) who has the burden of proving that the legal requirements for such an agreement have not been satisfied.

If the employee can prove that at the time the covenant not to compete was executed that the employer knew the limitations imposed were unreasonable, then the employee will be entitled to costs, including reasonable attorneys fees in defending actions to enforce the covenant.

If the limitations as to time, geographical area and scope of activity are not reasonable, then the court will reform the covenant to the extent necessary to make those limitations reasonable as to time, geographical area and scope of activity. Not until the non-competition agreement is reformed can the court award damages for its breach and damages will be limited to injunctive relief.

Speak To An Employment Law Attorney

If you have been asked to sign a non-compete agreement or have questions about the legality of a covenant not to compete, contact us today to schedule a consultation with a Dallas business lawyer to discuss your situation.