Growing Use of Non-Compete Clauses in Employment Contracts

More employers are turning to non-compete clauses when drafting employment law agreements and contracts. In fact, according to a research paper in the University of Michigan Law School’s Law and Economics Research Paper Series, as of about five years ago, as many as 20% of employees who had employment contracts were bound by non-compete clauses. In another recent survey, as many as 40% of respondents reported having at least one job in the past at which they were required to sign a non-compete agreement. Why are non-compete clauses used and what should employers know about them?

What is a Non-Compete Agreement?

 A non-compete agreement (a.k.a. a “covenant not to compete”) is a type of post-employment restrictive covenant that an employer asks an employee to sign as a condition of employment.  In such an agreement, the employee makes a promise not to engage in competition in some form with the employer during his or her employment and for a particular period of time after the employment relationship ends. The intent of a non-compete clause is to prevent the employee from conducting business that would directly compete with the employer in some fashion.  

 For a non-compete agreement to be enforceable in Texas, it must be part of an otherwise enforceable employment agreement and it must be reasonable in duration and scope. Employers are more likely to ask an employee in a high-skill, high-paying job to sign a non-compete agreement but some employers will require lower level workers to sign them as well.

 Why are More Employers Using Non-Compete Agreements in Employment Contracts?

 Employers in Dallas and throughout the country use non-compete clauses to protect their businesses and the investment they have made in their workforces.  Onboarding, training, and retaining employees is a costly endeavor. The last thing an employer wants is to spend time and money on an employee only to see that person leave the company and set up a competitive business using the knowledge and training they have received.  Furthermore, building up goodwill with customers and clients can be a lengthy and costly process and employers often want to protect this goodwill.

 What are the Benefits of a Non-Compete Clause?

 Non-compete clauses have many different benefits. For example, as mentioned above, these clauses can prevent an employee from using an employer to gain knowledge and skills, and then take those skills to a competitor. Non-compete clauses can also prevent an employee from revealing business or trade secrets, and from stealing the employer’s clients or customers. In brief, a non-compete clause can allow an employer to protect its business from unfair competition.

 Contact a Dallas Employment Law Attorney

 If you have questions about creating employment contracts containing non-compete clauses, it is important to speak with a Dallas employment law attorney. The lawyers at Simon | Paschal PLLC can discuss the proper use of non-compete clauses and how to ensure their enforceability. Contact Simon Paschal PLLC today to learn more about the services we provide to employers and HR managers in Texas.

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