Employers Beware When Using Non-Compete Agreements

Employers who want to restrict competition of employees after they leave employment must clearly state the time and scope of the restriction or risk having an unenforceable agreement.

The Dallas Court of Appeals in Dale v. Hoschar recently reminded employers that covenants not to compete are unenforceable if they do not contain a reasonable time and geographic restriction. Texas courts have long-favored freedom of employment, subject to reasonable and clearly-stated limitations on post-employment competition. Non-compete agreements should not be ambiguous, but should clearly and unequivocally state the terms of post-employment restrictions. Those restrictions must be reasonable as to time and the geographical area in which employment is restricted.

Bottom Line

Carefully draft non-competition agreements to only meet the legitimate needs of the employer and clearly state the terms of the agreement. An indefinite, over-reaching non-competition agreement may well not be an enforceable agreement at all.

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