Businesses often negotiate contracts with multiple outside parties. Organizations may have leases that allow them to use commercial space. They may have contracts with service providers, suppliers and vendors. They also likely have contracts with their employees.
Some workers, such as those in executive or managerial roles, could be in a position to harm the company if they leave their jobs. They learn private information about how the company operates and may have access to valuable trade secrets. Employers have historically used restrictive covenants as a means of protecting against worker misconduct during and after their employment.
Non-compete agreements are among the most popular restrictive covenants. They are also among the most scrutinized. Federal authorities have sought to prohibit the use of non-compete agreements in employment contracts, and some states have banned them. Can Texas businesses still enforce the terms of non-compete agreements after a worker violation?
Texas still recognizes non-compete agreements
Most states have not enacted rules banning non-compete agreements. The proposed federal ban suggested by the Federal Trade Commission (FTC) became unenforceable following multiple rulings by federal court judges, including a judge here in Texas.
Under current federal policy and state statutes, non-compete agreements are an enforceable component of employment contracts. Provided that the agreement meets all statutory requirements, employers can theoretically hold workers accountable for breaching a non-compete agreement.
Common infringing activities include taking positions with direct competitors or starting a competing business within the same industry. Provided that employers have documentation affirming that a breach of the non-compete agreement occurred, they can initiate a breach of contract lawsuit against the employee.
A civil court judge could potentially award an employer damages for the economic impact that the breach of a non-compete agreement may have created. They could also uphold penalty clauses assessing specific financial consequences for violations of the agreement. A judge could also issue an injunction prohibiting the worker from continuing to compete against their former employer.
Businesses that discover a former worker unfairly competing against the company may need to initiate breach of contract litigation. A successful lawsuit can remedy unfair competition and can serve as a poignant reminder to other employees about the importance of complying with the restrictive covenants in their contracts.