Drafting Notes - Employee Non-Compete Agreement (TX) - Practical Law Connect

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Employee Non-Compete Agreement (TX)

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In Ryan, LLC v. FTC, the court issued a final judgment setting aside the FTC's non-compete ban nationwide (2024
WL 3879954 (N.D. Tex. Aug. 20, 2024) ). For the latest on continuing legal challenges, see FTC Non-Compete
Clause Rulemaking Tracker .
A Texas compliant agreement between an employer and an employee limiting an

employee's competitive activities for a specified period after the employment relationship
ends. This Standard Document is intended for use by private employers. Local law may
impose additional or different requirements. For information on the scope of local law
coverage, see Local Law Coverage in Labor & Employment Resources. This Standard
Document has integrated notes with important explanations and drafting tips.
Note: Read This Before Using Document
Read This Before Using Document

This employee non-competition agreement (also known as a non-compete agreement or non-
compete) is intended for use by a company or other employer to limit certain competitive
activities of an employee when the employment relationship ends. It is based on Texas law
and is intended for use with employees or businesses located in Texas (see Standard
Document: Employee Non-Compete Agreement).
Texas courts generally disfavor non-competes because they act as restrictive covenants that
might limit individuals' ability to earn a living (Zep Mfg. Co. v. Harthcock, 824 S.W.2d 654, 658
(Tex. App.—Dallas 1992, no writ.)). Texas non-compete law is primarily governed by the Texas
Covenants Not to Compete Act (Tex. Bus. & Comm. Code Ann. §§ 15.50 to 15.52).
Employers seeking to bind employees to non-competes must consider the possible legal
challenges to enforcement in drafting the agreements. An employer should tailor a non-
compete to account for the various issues that may affect enforceability, such as whether the
non-compete:
Is supported by adequate consideration (see Drafting Note, Consideration).
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Is ancillary to, or part of, an otherwise enforceable agreement when the agreement is
made (see Drafting Note, Consideration).
Meets the standards for reasonableness under state law, including that it:
is of a reasonable duration (see Drafting Note, Duration of Restriction);

defines prohibited competitive activity to include only activity necessary to protect
the legitimate business interests identified (see Drafting Notes, Prohibited Activity
and Restrictive Covenants Acknowledgment); and
is reasonably limited in geographic scope or business parameters (see Drafting
Note, Geographic Scope or Business Parameters).
(Tex. Bus. & Comm. Code Ann. § 15.50(a).)
Includes provisions that supplement the restrictions on unfair or unlawful competition

with additional limitations restricting:
the solicitation of the employer's employees (see Drafting Note, Non-Solicitation of

Employees), customers, or clients (see Drafting Note, Non-Solicitation of
Customers); or
the use or disclosure of confidential information (see Drafting Note, Trade Secrets
and Confidential Information).
Special Rules for Attorneys and Medical Professionals

In Texas, a lawyer may not offer or make an agreement restricting a lawyer's right to practice:
After ending the relationship, except for an agreement about retirement benefits.
As part of a settlement agreement, except a settlement of a disciplinary proceeding

against a lawyer.
(TX ST RPC Rule 5.06.)
In Texas, a licensed physician may enter a non-compete relating to the practice of medicine
only if the agreement:
Does not deny the physician access to a list of his patients whom the physician had seen
or treated within one year of the end of the employment relationship.
Provides the physician access to patients' medical records with authorization of the
patients and copies of those medical records for a reasonable fee set by the Texas
Medical Board.
Provides that any access to a list of patients or to patients' medical records cannot
require the list or records to be in a different format than as maintained except by mutual
consent of the contracting parties.
Provides for a buy-out of the covenant:
by the physician at a reasonable price;

at the option of either party, as determined by a mutually agreeable arbitrator; or
in the case of an inability to agree, by a court-appointed arbitrator whose decision

is binding on the parties.
Provides that the physician may continue treatment to a specific patient or patients with
an acute illness even after the contract or employment has terminated.
(Tex. Bus. & Com. Code Ann. § 15.50(b).)
The requirements stated above do not apply to a physician's business ownership interest in a
licensed hospital or licensed ambulatory surgical center (Tex. Bus. & Com. Code Ann. §
15.50(c)).
Limitations of Non-Competes
Employers should understand what non-competes can and cannot accomplish. They can help
protect against unfair or unlawful competition by former employees, but they cannot
eliminate all forms of competitive activity.
Texas law disfavors non-compete agreements so employers should take additional

precautions to protect their valuable resources. For more information, see Practice Note, Non-
Compete Agreements with Employees: Alternatives to Non-Competes. For example,
confidentiality and proprietary rights agreements provide additional protection for employers,
particularly if a court evaluating a non-compete declines to enforce it (see Standard
Document, Employee Confidentiality and Proprietary Rights Agreement (TX) and Practice
Note, Non-Compete Agreements with Employees: Alternatives to Non-Competes).
Bracketed Text
Counsel should replace bracketed text in ALL CAPS with information specific to the particular
circumstances. Bracketed text in sentence case is optional or alternative language that counsel
should include, modify, or delete, as appropriate. A forward slash in bracketed text indicates
that counsel should choose from among two or more alternative words or phrases.
Note: Defining Employer
Defining Employer
Most employers enter into non-compete agreements on behalf of themselves and their
affiliates and subsidiaries. The bracketed language in the preamble, "[on behalf of itself, its
[current, past, and future] [parents,] subsidiaries, and other corporate affiliates (collectively
referred to herein as, the "Employer Group")], "provides optional language to encompass
corporate affiliates as third-party beneficiaries (either by name or description). The term
affiliate is most often used to mean entities that control, are controlled by, or are under
common control with a given entity, including the corporation's parent and subsidiaries,
although "subsidiaries" are sometimes referenced separately for clarity.
Whether to include affiliates depends on the nature of the employer, its ownership, and its
organizational structure. Unless there is clearly no legitimate business interest in including
corporate affiliates, there is little practical downside to being overinclusive The employer also
should define employer, or the employer group, to include both past and future subsidiaries to
ensure the business is protected following a merger, acquisition, or corporate name change.
If the employer uses this optional language to include affiliates, certain references to Employer
should be changed to Employer Group, as indicated by optional language throughout the
Standard Document.
The other optional language defines the employer's "successors or assigns" as part of the
Employer Group. This language may be necessary if the employer assigns the non-compete
agreement and transfers the employee's employment to another entity, as may occur in an
asset purchase, corporate reorganization, or other corporate transaction (see Drafting Note,
Assignment by the Employer). The optional language helps ensure that the non-competition
or non-solicitation period runs from an employment termination with the successor or
assignee entity, and not only from an employment termination with the original employer.
However, to get the benefit of this language, the employer should define the Restricted Period
for each covenant as running from the termination of employment with the Employer Group,
not just the Employer. (See Section 2(b), Section 2(c), and Section 2(d).)
Note: Consideration
Consideration
Employers must provide legally adequate consideration to support employees' agreements
not to compete. In Texas, sufficient consideration hinges on whether the non-compete is
ancillary to or part of an otherwise enforceable agreement at the time the agreement is made
(Tex. Bus. & Comm. Code Ann. § 15.50(a)). Consideration that is reasonably related to an
interest worthy of protection is sufficient (Marsh USA Inc. v. Cook, 354 S.W.3d 764, 775 (Tex.
2011)).
Texas courts distinguish between non-compete agreements and agreements which merely
incentivize employee loyalty. An agreement is not considered a non-compete agreement
under Texas law if it only penalizes an employee by requiring forfeiture of a bonus or other
financial incentive if that employee engages in a competitive activity. (Exxon Mobil Corp. v.
Drennen, 452 S.W.3d 319, 327-29 (Tex. 2014).)
Texas employers may not bind existing at-will employees to non-compete agreements without
offering new consideration (Martin v. Credit Prot. Ass'n, Inc., 793 S.W.2d 667, 669-70 (Tex. 1990)).
The employer's promise to the employee is illusory unless both:
The consideration the employer provides the employee gives rise to the employer's
interest in restraining the employee from competing.
The covenant is designed to enforce the employee's consideration or return promise.
(Sheshunoff Management Services, L.P. v. Johnson, 209 S.W.3d 644, 648-51 (Tex. 2006).)
Employers that want to foreclose any inadequacy of consideration argument may offer the
employee additional incentives in connection with signing the agreement including:
Promotion to a new position offering supplemental compensation or other benefits, or

both, particularly if the employee is to have access to additional confidential or
proprietary information in the person's new position.
A one-time payment to the employee that is:
not negligible; and
a payment the employee is not otherwise entitled to receive.
In that case, the employer should recite these incentives as consideration in place of or in
addition to "employment by the Employer" in the above clause.
For more information on consideration to support a non-compete agreement and the risks of
having employees sign non-compete agreements after the inception of employment, see
Practice Note, Non-Compete Agreements with Employees: Contract Law Requirements and
State Q&A, Non-Compete Laws: Texas: Question 8.
Note: Trade Secrets and Confidential Information
Trade Secrets and Confidential Information

Describing confidential information and trade secret information in an employee
non-compete helps an employer identify its legitimate business interest, which
strengthens its argument that it needs the protection of a non-compete agreement.
Under Texas law, the employer's trade secret or confidential information is one
legitimate business interest that an employer may seek to protect with a non-
compete (see Drafting Note, Restrictive Covenants Acknowledgment).
Non-compete agreements should define confidential information consistently with

the definition in the employer's confidentiality and proprietary rights agreements, if
it uses a separate agreement (see Standard Document, Employee Confidentiality
and Proprietary Rights Agreement (TX): Drafting Note: Confidential Information). As
with the confidentiality agreement, employers should carefully modify the
paragraph that identifies the confidential information according to the nature of the
employer's business and industry. Employers can further define the information
subject to protection by identifying a subset of this information, such as
information specific to a corporate department, research project, or product offered
by the company.
If the employer values a certain category of information and intends to protect it

from unauthorized competitive use, it should be listed in this paragraph. Although
agreements of this type regularly refer to a long list of protected information (and
the agreement typically provides that the list is not exhaustive), the more narrowly
tailored the list of information is to the employer's legitimate business interest, the
more likely it is to be regarded as a reasonable and enforceable restriction. When
assessing which information should be designated as confidential, employers
should consider:
What information is a trade secret (see Drafting Note, Trade Secrets and
Confidential Information).
What information gives the employer a competitive advantage.

What information, if disclosed, is likely to harm the employer.
What information makes the employer's business model, products, or services

distinctive or unique.
Whether there is additional information specific to the employer's industry
that should be included (for example, architectural plans for engineers,
flavorings for food processors, and fabric dyes for clothing manufacturers).
Likewise, the lists of the employer's relevant third-party associates (whose

confidential information may be entrusted to the employee and therefore subject
to the agreement) should be modified to fit the employer's business and industry.
For example, the terms "clients," "patients," or "subscribers" might be substituted
for the term "customers."
Some employers that use artificial intelligence (AI) and other technologies may
want to separately identify more technology-specific terms, although the broad
definition provided likely covers any protectable information. For a sample, see
Standard Document, Employee Confidentiality and Proprietary Rights Agreement:
Drafting Note: AI and Other Technologies. For more information about AI generally,
see Practice Note, Artificial Intelligence (AI) in the Workplace.
National Labor Relations Act

Section 7 of the National Labor Relations Act (NLRA), both unionized and non-
unionized employees the right to discuss the terms and conditions of their
employment (such as wages) with co-workers and union representatives (29 U.S.C.
§ 157). Employers should draft any confidentiality provision so employees would
reasonably understand that the provision does not infringe on their Section 7
rights, for example, by excluding information regarding terms and conditions of
employment from the definition of confidential information.
Employers also should consider including a Section 7 disclaimer (also known as a

savings clause) clarifying that the confidentiality provision is not intended to limit
employees' Section 7 rights or otherwise restrict disclosures permitted by
applicable law (see Drafting Note, NLRA Compliance).
The precise boundaries of permissible confidentiality provisions have been in flux

given changes at the National Labor Relations Board (NLRB). For the latest
developments, see:
Practice Note, Employee Electronic Communications Under the National

Labor Relations Act : Confidentiality Rules.
Standard Document, Confidential Information Policy: Drafting Note: National
Labor Relations Act Compliance.
The NLRB's Boeing Categories for Employment Rules Chart: Confidentiality
Rules.
Note: Disclosure and Use Restrictions
Disclosure and Use Restrictions

This Standard Document assumes that the employer maintains a separate confidentiality
and proprietary rights agreement with employees. An employer should maintain a
separate agreement to protect those rights because if a court declines to enforce a non-
compete clause, it may decline to enforce all other subsections of the same agreement.
Employers can seek to enforce the remainder of unenforceable non-competes by
including severability provisions (see Drafting Note, Severability). However, Texas court
are not always required to honor severability clauses. Courts may decline to reform (or
engage in blue penciling) a non-compete agreement where the unenforceable provision
and the underlying agreement involve mutually dependent promises. (See Sheline v. Dun
& Bradstreet Corp., 948 F.2d 174, 177-78 (5th Cir. 1991).) As a result, the odds of enforcing
a confidentiality and proprietary rights covenant are greater if the employer maintains a
separate agreement on the issue.
Employers that do not want to create a stand-alone confidentiality and proprietary rights
agreement despite these risks may use the optional language above to protect those
interests. For more information on disclosure and use restrictions, see Standard
Document, Employee Confidentiality and Proprietary Rights Agreement (TX): Drafting
Note: Disclosure and Use Restrictions and State Q&A, Non-Compete Laws: Texas:
Question 16.
Notice of Immunity Under the Defend Trade Secrets Act of 2016

If the employer includes a confidentiality provision in this agreement, it should also
include Section 1(d), which is drafted to comply with the notice requirements under the
Defend Trade Secrets Act (DTSA). The DTSA creates a federal civil remedy for trade secret
misappropriation. The DTSA supplements but does not preempt state law.
The DTSA provides whistleblower protection from civil and criminal liability under the
DTSA and any state trade secret law for employees (defined to include individuals
performing work as contractors or consultants) who disclose a trade secret if the trade
secret disclosure is made either:
In confidence and solely to report or investigate a suspected violation of the law:
to a federal, state, or local government official; or
to an attorney.
In a complaint or other document filed under seal in a lawsuit or other proceeding.
(18 U.S.C. § 1833(b)(1).)
The DTSA also affects the scope of permissible trade secret disclosure by employees who
file a lawsuit for retaliation by an employer. The DTSA specifically allows the individual to
disclose the employer's trade secret to an attorney and use the trade secret in the court
proceeding if the employee both:
Files any document containing the trade secret under seal.
Does not disclose the trade secret, except under court order.
(18 U.S.C. § 1833(b)(2).)
However, the DTSA does not authorize or limit liability for an act that is otherwise
prohibited by law, such as unlawfully accessing material by unauthorized means (18
U.S.C. § 1833(b)(5)).
Employers must provide a notice to their employees of the DTSA's immunity provisions in
any contract that governs the use or disclosure of trade secrets or other confidential
information. Failure to do so may deprive the employer of the ability to recover from an
employee who did not receive notice:
Exemplary damages, which are up to two times the amount of actual damages.
Attorneys' fees.
An employer alternatively may provide the required notice by reference to a policy

document that:
Sets out the employer's reporting policy for a suspected violation of the law.
Provides notice of the DTSA's immunity provisions.
(18 U.S.C. § 1833(b)(3) .)
Either alternative clause in Section 1(d) may be used to comply with the DTSA's notice
provisions. However, if the employer does not incorporate any substantive confidentiality
provisions in this non-compete agreement, and just references a stand-alone
confidentiality agreement, the DTSA notice is unnecessary. In that case, the DTSA notice
should be incorporated in the confidentiality agreement (for a sample, see Standard
Document, Employee Confidentiality and Proprietary Rights Agreement (TX): Section 1(b)
(v) and Standard Clause, Notice of Immunity Under the Defend Trade Secrets Act (DTSA)
Provision).
Although there is an affirmative obligation under the statute to provide the notice, the
only stated consequence for failure to provide the notice is the employer's inability to
recover exemplary damages and attorneys' fees under the DTSA. However, similar
remedies may be available to the employer under state law. For more information on
state law remedies, see Drafting Note: Remedies and State Q&A: Trade Secret laws: Texas:
Question 14.
For more information on the DTSA, see Practice Note, Employment Litigation: DTSA
Claims and Defend Trade Secrets Act (DTSA) Issues and Remedies Checklist.
Authorized Communications with Securities Regulators

According to the Financial Industry Regulatory Authority (FINRA), confidentiality
provisions in settlement agreements, and by extension, in other employee agreements
with confidentiality provisions, should expressly authorize employee communications
with securities regulators such as the Securities and Exchange Commission (SEC)
(Regulatory Notice 14-40 ).
In addition, Rule 21F-17 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank) prohibits impeding an individual from communicating
directly with SEC staff about a possible securities law violation, including enforcing or
threatening to enforce a confidentiality agreement or provision that prohibits
whistleblowers from communicating with the SEC (17 C.F.R. § 240.21F-17). To comply
with this rule, the agreement should not impede employees from reporting suspected
wrongdoing to the SEC or prevent them from receiving whistleblower awards. The SEC
also has challenged provisions that require an employee to notify the employer before
disclosing information under a court order or related proceeding, and therefore the
notice provisions in this agreement are treated as optional language.
The SEC has been taking steps to enforce this rule. For updated information on the SEC's
efforts, see Standard Document, Separation and Release of Claims Agreement (Long-
Form): Authorized Communications with Securities Regulators.
NLRA Compliance
The optional language regarding interference with employee rights under the NLRA is
recommended and intended to address recent decisions and guidance by the NLRB
suggesting that confidentiality clauses may be viewed as interfering with an employee's
Section 7 rights. While a full discussion of this issue is beyond the scope of this drafting
note, counsel drafting any agreements with confidentiality provisions should be aware of
the types of clauses and language the NLRB has found invalid. For more on NLRA
compliance, see Practice Note, Employee Electronic Communications Under the National
Labor Relations Act and The NLRB's Boeing Categories for Employment Rules Chart.
OSHA Guidance
The Occupational Safety and Health Administration (OSHA) has issued enforcement
guidance with policy guidelines for its approval of private settlement agreements under
the statutes it administers, including the Occupational Safety and Health Act (OSH Act)
and Sarbanes-Oxley Act (SOX). Although the guidance is specifically directed at
settlement agreements, non-compete and confidentiality agreements may contain
provisions that OSHA would find offensive because they impermissibly restrict or
discourage protected whistleblower activity. For this reason, OSHA is included among the
optional governmental agencies with which communications are permitted. For more
information on the guidance, see Standard Document, Settlement and Release of Claims
Agreement: Single Plaintiff Employment Dispute (TX): Drafting Note: OSHA Policy
Guidelines.
Note: Restrictive Covenants Acknowledgment
Restrictive Covenants Acknowledgment

Texas courts generally decline to enforce non-competes that are more restrictive
than necessary to protect the employer's legitimate protectable interests (Tex. Bus.
& Comm. Code Ann. § 15.50(a)). Therefore, employers should both:
Describe their legitimate business interests as well as their intent to use the
non-compete to protect those interests.
Require employees to acknowledge that the restrictive covenant is necessary
to protect those business interests.
Texas courts recognize legitimate business interests that may be protected by non-
competes, including both employers':
Trade secrets or, in some situations, confidential information (see Marsh USA,
354 S.W.3d at 775).
Goodwill (Tex. Bus. & Comm. Code Ann.§15.50(a) and Marsh USA, 354 S.W.3d at
777-78).
Employers should customize this Standard Document based on the specific

protectable interest that the non-compete is designed to protect.
Goodwill
Texas law specifically recognizes business goodwill as a business interest
protectable by a non-compete agreement (Tex. Bus. & Com. Code Ann. § 15.50).
Goodwill is the advantage or benefit that a business acquires from the general
public's patronage and encouragement, which it receives from either:
Constant and habitual customers because of its local position.

Common celebrity or reputation for skill, influence, or punctuality.
(Marsh USA, 354 S.W.3d at 777-78.)
Trade Secrets and Confidential Information

The lengthy definition of confidential information and the requirement that the
employee acknowledge its value help define the employer's legitimate business
interest. Confidential and proprietary information is a legitimate business interest
that can be protected by a non-compete agreement (Marsh USA, 354 S.W.3d at 774-
75.) To be protectable, information must be confidential. The information is not a
protectable interest if the information either:
Can be obtained readily from sources other than the employer.
Does not provide the employer with a competitive advantage due to the fact
that the information is confidential.
(DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 684 (Tex. 1990).)
The Texas Uniform Trade Secrets Act (TUTSA) (Tex. Civ. Prac. & Rem. Code Ann. §§
134A.001 to 134A.008 defines "trade secret" all forms and types of information:
Including:
business information;
scientific information;
technical information;
economic information;
engineering information;
formulas;
patterns;
compilations;
programs;
devices;
methods;
techniques;
processes;
financial data; or
lists of actual or potential customers or suppliers.
That derives independent economic value, actual or potential, because it is

not:
generally known; and

readily ascertainable by proper means.
Is the subject of reasonable efforts under the circumstances to maintain its

secrecy.
(Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(6).)
Unique, Special, or Extraordinary Services

The employer should include the unique, special, or extraordinary services
provision because employees who provide these services may be bound to a non-
compete obligation even if they have limited or no access to confidential
information. Using this clause gives employers another means to demonstrate the
legitimate business purpose the non-compete protects. Although not all employees
provide "unique, special, or extraordinary" services, it is nearly impossible to
determine to a legal certainty what kinds of services qualify and what kind do not
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without judicial review. Examples of an employee providing unique, special, or
extraordinary services include:
An employee who serves as the public face of a company.
An employee who provides intellectual expertise.

A company's primary rainmaker.
An especially talented or marketable athlete, artist, or musician.
If it is possible to identify the unique, special, or extraordinary services offered by

the employee, employers should use the optional language above to do so.
Inevitable Disclosure Doctrine

Texas courts have not adopted a categorical inevitable disclosure rule applicable to
all nondisclosure provisions in Texas (DGM Services, Inc. v. Figueroa, 2016 WL
7473947, at *5 (Tex. App.—Houston [1st Dist.] Dec. 29, 2016, no pet.)). In at least two
cases, courts granted preliminary injunctions where the employees' knowledge of
specific manufacturing techniques made it "virtually impossible" for the employees
to offer their services without using their former employers' trade secrets (see FMC
Corp. v. Varco Int'l, Inc., 677 F.2d 500, 504 (5th Cir. 1982) and Weed Eater, Inc. v.
Dowling, 562 S.W.2d 898, 902 (Tex. Civ. App.—Houston [1st Dist.] 1978, writ refused
n.r.e.)). However, in no case have Texas courts expressly adopted the inevitable
disclosure doctrine.
Under the TUTSA, actual and threatened misappropriation may be enjoined (Tex.
Civ. Prac. & Rem. Code Ann. § 134A.003(a)).
The inclusion of the "threatened misappropriation" language in the TUTSA

expressly recognizes the doctrine of inevitable disclosure. The TUTSA applies only if
the alleged misappropriation began on or after September 1, 2013. Texas common
law governs any misappropriation or continuing misappropriation that began
before September 1, 2013. Before the adoption of the TUTSA, the Texas Court of
Appeals in Dallas, in an unreported decision, applied a modified version of the
inevitable disclosure doctrine, holding that enjoining an employee from using an
employer's confidential information is appropriate where it is probable that the
former employee will use the confidential information:
For the employee's benefit.
For the new employer's benefit.

To the detriment of the former employer.
(Conley v. DSC Communications Corp., 1999 WL 89955, at *4 (Tex. App.—Dallas Feb.

24, 1999, no pet.).)
Note: Non-Competition
Non-Competition
To be enforceable under Texas law, a non-compete must:
Have been ancillary to, or part of, an otherwise enforceable agreement when the
agreement was made.
Be reasonable concerning time, geographical area, and scope of activity to be
restrained.
Impose no greater restraint than necessary to protect the employer's (or

promisee's) goodwill or other business interest.
(Tex. Bus. & Com. Code Ann. § 15.50(a).)
For more information on standards of reasonableness for non-competes under Texas law,
see:
Prohibited Activity.
Geographic Scope or Business Parameters.

Duration of Restriction.
Prohibited Activity
A crucial element in drafting any non-compete is defining what types of post-
employment activities are prohibited. Because enforcement often hinges on whether the
restriction is reasonably necessary to protect the employer's legitimate business interest,
the employer should not define prohibited activity more broadly than necessary to
accomplish that purpose. Instead, an employer should define it as specifically as
possible, which increases the likelihood that the non-compete is enforced (see Drafting
Note, Restrictive Covenants Acknowledgment).
Geographic Scope or Business Parameters

Most non-competes prohibit competitive activity within a defined geographic scope,
commonly defined as the "Restricted Territory." Geographic scope may be restricted, for
example, to a state, several states, or a square mile radius. The geographic limitation
should always be tailored to the legitimate needs of the company to maximize the
potential for enforceability. For example, employers that conduct business in only one
state should limit the geographic scope of the non-compete to that single state.
Employers that conduct business in a larger geographic area may create correspondingly
broader geographic restrictions if necessary to protect a legitimate business interest.
Under Texas law, a reasonable geographic limitation is often considered to be the

territory in which the employee worked for the employer (TransPerfect Translations, Inc.,
v. Leslie, 594 F.Supp.2d 742, 754 (S.D. Tex. 2009) and Zep Mfg., 824 S.W.2d at 660). A
reasonable restriction on activities can substitute for a geographical limit, such as a non-
compete covenant limited to the employee's clients (Gallagher Healthcare Ins. Servs. v.
Vogelsang, 312 S.W.3d 640, 654-55 (Tex. App.—Houston [1st Dist.] 2009, no pet.)).
Some employers, particularly those engaged in e-commerce, operate without physical

geographic limits and may therefore have difficulty identifying an appropriate
geographic restriction (see Practice Note, Non-Compete Agreements with Employees:
Impact of E-Commerce). An alternative to a geographic restriction is to identify a limited
set of business activities or customers that are off-limits to a departing employee. This
kind of restriction might be used in conjunction with a nationwide US restriction because
it makes the broad geographic restriction narrower and more reasonable.
Duration of the Restriction

Challenges to the reasonableness of non-competes regularly include claims that the
restriction period is too long. Texas courts have repeatedly enforced time restrictions
from two to five years. However, employers should be able to show why a specific period
is necessary. (Gallagher, 312 S.W.3d at 654-55.) For more information on what constitutes
reasonable duration, see Practice Note, Non-Compete Agreements with Employees:
Drafting Note: State Law Specific to Non-Compete Agreements and State Q&A, Non-
Compete Laws: Texas: Question 9.
Employers that impose the same restriction for each of the non-competition, non-
solicitation of employees, and non-solicitation of customers may use the optional
"Restricted Period" definition. The other restrictive covenants may simply refer to the
Restricted Period without redefining it.
Most non-competes are drafted with an eye toward competition following termination of
employment, but some may be drafted to prevent unlawful competition during the
employee's employment as well. This Standard Document includes optional language
defining the Restricted Period to include the employment term, though the enforceability
of this provision may vary depending on applicable state law.
It also includes optional language specifying that the non-competition provision applies
regardless of the reason for the employment termination, whether voluntary or
involuntary (though in some jurisdictions courts may not enforce restrictive covenants
following an involuntary termination or layoff) (see Voluntary Versus Involuntary
Termination).
If the employer enters into a corporate transaction resulting in the employee's transfer or
assignment of employment to a successor or assignee entity and does not want the
Restricted Period to begin at the time of that transfer, counsel should define:
The Employer Group to include successors and assigns (see Drafting Note, Defining
Employer).
The Restricted Period as running from the termination of employment by any entity
within the Employer Group, not just a termination of employment with the
Employer.
If an employer rehires an employee after a layoff, the employer should have the
employee sign a new non-compete at the time of rehire. Otherwise the restricted period
may be deemed to run from the time of the initial layoff and therefore may expire by the
time of the employee's final employment termination (see, for example, Russomano v.
Novo Nordisk, Inc., 2020 WL 2847078 (1st Cir. June 2, 2020)).
Payment During the Restricted Period

Employers concerned about the enforceability of non-compete restrictions should
consider paying the employee during the restricted period. Depending on the specific
terms of the payments, including the amount and duration of the payments and whether
an employer has the right to terminate the non-compete restriction and its payment
obligations at any time, the payments may be subject to the restrictions of Section 409A
of the Internal Revenue Code (IRC). The applicable payment provisions should be
structured and drafted to ensure that the payments either comply with or are exempt
from IRC Section 409A. For more information on IRC Section 409A, see Practice Note,
Section 409A: Deferred Compensation Tax Rules: Overview.
Voluntary Versus Involuntary Termination

The optional phrase above, "regardless of the reason for the employment termination,
whether voluntary or involuntary," describes the effect of termination on the non-
compete restriction. Whether this phrase should be used depends on state law.
The Texas Covenants Not to Compete Act does not address termination as a factor in
non-compete enforcement. Texas courts have focused instead on the enforceability of
non-competes based on the requirements and limitations of the act, noting the freedom
of contract provision of the Texas Constitution (see Tex. Const. art. I, § 16 and Marsh, 354
S.W.3d at 768). For example, courts focus on the reasonableness of geographical limits or
adequacy of consideration in cases where non-competes apply to both voluntary and
involuntary terminations (see Butler v. Arrow Mirror & Glass, Inc., 51 S.W.3d 787, 793 (Tex.
App.—Houston [1st Dist.] 2001, no pet.) and Sheshunoff, 209 S.W.3d at 656).
Forfeiture-For-Competition
A forfeiture-for-competition clause typically provides that an employee who leaves the
employer to work for a competitor forfeits any deferred compensation the employer
would have owed the employee had the employee remained with the employer.
Texas courts analyze forfeiture-for-competition clauses the same way they analyze non-
competes because both restrain a former employee from competing (Peat Marwick Main
& Co. v. Haass, 818 S.W.2d 381, 385 (Tex. 1991) and Valley Diagnostic Clinic, P.A. v.
Dougherty, 287 S.W.3d 151, 155 (Tex. App.—Corpus Christi–Edinburg 2009, no pet.); but
see Exxon Mobil, 452 S.W.3d at 327-29).
Note: Non-Solicitation of Employees
Non-Solicitation of Employees
Enforcement of non-solicitation of employee obligations, like non-competition
obligations, depends largely on state law. Courts are more willing to enforce restrictions
on solicitation of employees than restrictions on engaging in competitive activity
generally. However, courts generally assess non-competes and non-solicitation
covenants by considering the same factors. In Texas, non-solicitation agreements are
governed by the Texas Covenants Not to Compete Act and are therefore subject to the
same analysis as non-competes (Marsh, 354 S.W.3d at 768 and Shoreline Gas, 2008 WL
1747624 at *10). For more information on these factors, see Drafting Notes, Restrictive
Covenants Acknowledgment and Non-Competition and Practice Note, Non-Compete
Agreements with Employees: Creating a Non-Compete.
Case law has not yet established the clear boundaries of an employer's ability to limit a
former employee's post-employment communications on social media. To the extent
employers want social media communications covered by a non-solicitation clause, they
should include language expressly stating this. At least one court has refused to infer
social media prohibitions that were not included in the parties' agreement (see, for
example, BTS, USA, Inc. v. Exec. Perspectives, LLC, 2014 WL 6804545, at *12 (Conn. Super.
Ct. Oct. 16, 2014) and Legal Update, Epstein Becker: Connecticut State Court Refuses to
Infer Social Media Non-Solicit Restrictions in Restrictive Covenant, Denies Trade Secret
Protective Relief).
In NRT Texas LLC v. Wilbur, the court, when considering a motion for temporary
restraining order, held that an employee had violated her non-solicitation agreement by
making a social media post that encouraged real estate agents, including agents she
previously supervised, to join her new endeavor (2022 WL 5434332, at *8 (S.D.Tex., 2022)).
Another federal court sitting in Texas used a former employee's social media posts as
evidence to support the issuance of a preliminary injunction because the posts solicited
customers and promoters in favor of a competitor. However, the non-solicitation
agreement at issue in that case did not specifically address social media use. (Le-Vel
Brands, LLC v. Bland, 2019 WL 4753041, at *9 (N.D. Tex. Sept. 30, 2019).)
The few courts addressing the issue generally have concluded that merely friending an
individual on Facebook or updating a LinkedIn profile, without more, does not violate a
non-solicitation clause because there are many reasons other than solicitation why
individuals connect on social media. To address this, employers may want to clearly
define what conduct is and is not prohibited by the agreement, for example, by expressly
allowing an employee to update the employee's LinkedIn profile. This clause includes
optional language clarifying the reach of the non-solicitation provision. For more
information about social media and restrictive covenants, see Practice Note, Social
Media and Restrictive Covenant Litigation and Social Media Conduct and Restrictive
Covenant Checklist.
This clause also contains optional language to clarify that any restrictions on
communication are not intended to restrict or interfere with the employee's (or former
employee's) Section 7 rights under the NLRA (see Drafting Note, National Labor Relations
Act).
In October 2016, the Federal Trade Commission (FTC) and Department of Justice (DOJ)
issued a joint guidance for human resource (HR) professionals that prohibits no-poaching
agreements. Employers should ensure that the non-solicitation of employees provision is
supported by a legitimate business interest and does not constitute an impermissible no-
poaching agreement. In January 2021, the DOJ announced the first criminal
indictment against a health care company for agreeing with competitors not to solicit
their senior employees in violation of the 2016 guidance. Employers should ensure that
the non-solicitation of employees provision is supported by a legitimate business interest
and does not constitute an impermissible no-poaching agreement. For more information
on the HR guidance, see Legal Update, FTC and DOJ Issue Antitrust Guidelines for HR
Professionals and Article, Expert Q&A on the DOJ and FTC Antitrust Guidance for HR
Professionals and Its Impact on Employers.
Note: Non-Solicitation of Customers
Non-Solicitation of Customers
Enforcement of non-solicitation of customers restrictions depends on state law.
Many courts regard solicitation of customers as a kind of competitive activity. Texas
courts use the same analysis for non-solicitation agreements and non-compete
agreements (Shoreline Gas, 2008 WL 1747624 at *10). For more information on these
factors, see Drafting Notes, Restrictive Covenants Acknowledgment and Non-
Competition and Practice Note, Non-Compete Agreements with Employees:
Creating a Non-Compete.
The case law has not yet established the clear boundaries of an employer's ability
to limit post-employment communications on social media. To the extent
employers want social media communications covered by a customer non-
solicitation clause, they should include language expressly stating this. For more
information about social media and restrictive covenants, see Practice Note, Social
Media and Restrictive Covenant Litigation and Drafting Note, Non-Solicitation of
Employees.
The additional bracketed language in the customer non-solicitation section allows

employers to create a more or less restrictive non-solicitation obligation. Employers
can prohibit solicitation of only current customers or broaden the restriction to
encompass former and prospective customers. However, if the agreement covers
prospective customers, without limitation or definition, the agreement may be
challenged as overbroad, as in most businesses the universe of prospective
customers is potentially limitless.
One option is to define prospective customers as those individuals or entities that

the employer actively pitched or solicited for business during a certain time period.
Another option is to restrict solicitation with only those customers the employee
has contacted recently or about whom the employee has personal information.
These additional limitations promote enforcement of the restrictive covenant by
reducing the burden on the departing employee and weakening any argument that
the covenant is overbroad. This optional language also helps promote enforcement
in jurisdictions that are particularly unfriendly to post employment restrictive
covenants.
If needed for specific industries or companies, substitute the word "customer" for a
more appropriate term, such as "client," "patient," "subscriber," or other term of art.
Note: Non-Disparagement
Non-Disparagement
The employer may want to include a provision in the agreement barring the employee from
making negative remarks about the employer, noting that the prohibition does not interfere
with existing legal rights such as Section 7 rights under the NLRA or rights to communicate
with securities regulators. For more information, see Drafting Note, Authorized
Communications with Securities Regulators and Practice Notes:
Employee Electronic Communications Under the National Labor Relations Act: Rules
Against Defamatory or Disparaging Statements.
Employer-Side Strategies for Negotiating a Severance or Settlement Agreement: Single
Plaintiff Employment Dispute: Impact of NLRB Rulings on Standard Provisions.
Sexual Harassment Claims in Settlement, Arbitration, and Other Employment

Agreements State Laws Chart: Overview
Note: Acknowledgment: "At-Will" Employment Status
Acknowledgment: "At-Will" Employment Status

Texas is an at-will employment state. Employers entering into this agreement with employees
working under written employment contracts may either use this stand-alone agreement or
incorporate the desired non-compete provisions into the primary employment agreements. If
this non-compete language is being incorporated into an employment agreement, the
employer should not include the optional language stating that it is not a contract of
employment. If the employment relationship is not terminable at-will, the employer should
not include that language either.
To enhance the enforceability of the agreement, some employers may want or be required by
statute to include an acknowledgement or statement that the employee had an opportunity to
consult with counsel. There are no such requirements under Texas law.
Note: Remedies
Remedies
Although this clause includes optional language stating that the employer is entitled to
injunctive relief for any breach or threatened breach of any provision of the agreement, the
parties' Agreement on this issue is not dispositive. The courts ultimately decide the propriety
of granting an injunction and apply varying tests to this analysis (see State Q&A, Non-Compete
Laws: Texas: Questions 14 and 15). Similarly, while this clause also includes optional language
stating that no bond or security is required for the issuance of an injunction, the bond
requirement generally is left to the discretion of the court. Some courts, by local rules or
otherwise, require the posting of a bond, or may specify a minimum bond amount. This
language may still be helpful in preventing employees from arguing that an injunction is not
warranted or that a bond is necessary to protect against any harm resulting from issuing an
injunction.
For more on injunctive relief standards, see Standard for Preliminary Injunctive Relief by
Circuit Chart and Injunctive Relief Toolkit (Federal).
Liquidated Damages
Some jurisdictions may also allow for contracts imposing liquidated damages. However,
liquidated damages must bear some reasonable relationship to the actual damages, or else
they may be found void as an unenforceable penalty.
Liquidated damages provisions may be enforceable in Texas if:
The harm caused by the breach is incapable or difficult of estimation.

The amount of liquidated damages called for is a reasonable forecast of just
compensation.
Texas courts do not enforce punitive contractual damages provisions. (FPL Energy, LLC v. TXU
Portfolio Mgmt. Co., L.P., 426 S.W.3d 59, 69-70 (Tex. 2014) and Phillips v. Phillips, 820 S.W.2d 785,
788 (Tex. 1991).)
For a sample liquidated damages clause that can be adopted for use in non-compete
agreements, see Standard Clauses, General Contract Clauses: Liquidated Damages.
Note: Assignment by the Employer
Assignment by the Employer

In most states, non-compete agreements may generally be assigned by the employer if
the contract creating the agreement specifically provides for assignment. Texas law
allows employers to assign non-compete agreements if the agreements specifically
provides for assignment (see Int'l Power Machines Corp. v. Power Specialists, Inc., 1996 WL
722074, at *3 (N.D. Tex. Dec. 6, 1996), citing Thames v. Rotary Eng'g Co., 315 S.W.2d 589,
590 (Tex. Civ. App.—El Paso 1958, writ refused n.r.e.)). However, the contractual terms, for
example, geographical limitation, in the non-compete may not expand following an
assignment (see M-I LLC v. Stelly, 733 F.Supp.2d 759, 795 (S.D. Tex. 2010)).
Note: Arbitration
Arbitration
An employer should only include an arbitration clause in the agreement if it wants to resolve
disputes in an arbitral forum. Texas principles of contract law control arbitration clauses.
Arbitration clauses are statutorily allowed under the General Texas Arbitration Act (TAA) (Tex.
Civ. Prac. & Rem. Code §§ 171.001-171.098). A written agreement to arbitrate is valid and
enforceable and may be avoided only on a ground that exists at law or in equity for the
revocation of a contract (see Tex. Civ. Prac. & Rem. Code § 171.001).
If an employer chooses to include an arbitration provision, it should also consider whether to

include a fee-splitting arrangement. In the absence of a contractual provision governing the
payment of fees, the rules of the arbitration forum selected by the parties governs.
Employers should use caution in using the optional cause above regarding each party paying
its own costs of arbitration. A Texas court may sever a fee splitting agreements where a
plaintiff's fees could be prohibitively expensive and would serve to prevent a plaintiff
employee from pursuing a claim (Carter v. Countrywide Credit Industries, Inc., 189 F.Supp.2d
606, 620 (N.D. Tex. 2002)).
Employers that include an arbitration provision should ensure that the choice of venue
provision is consistent with the arbitration provision.
For more information on arbitration clauses, examples of arbitration organizations and

relevant language suggested by those organizations, see US Arbitration Toolkit.
Note: Warranty
Warranty
This optional clause does not require that the employee attest that they are free from any non-
compete or related obligations, but only that they are free from non-compete or related
obligations that would interfere with or hinder their new employment. Including this clause
gives the employer some protection against litigation from former employers of the employee.
It also prompts new employees to inform the new employer about any agreements that may
create a litigation risk.
Note: Choice of Law and Forum Selection
Choice of Law and Forum Selection

Choice of law and forum selection clauses in non-competes are powerful tools that may
dictate the outcome of a non-compete dispute. This Standard Document is based on Texas law
and is intended for use with employees or businesses located in Texas. For that reason, Texas
is selected as the governing law and venue in this provision. For a jurisdiction-neutral non-
compete agreement, see Standard Document, Employee Non-Compete Agreement.
A Texas court generally enforces a contractual choice of law provision unless either:
The choice of law provision violates a fundamental Texas public policy.

The contract bears no reasonable relation to the chosen state.
(Cardoni v. Prosperity Bank, 805 F.3d 573, 581 (5th Cir. 2015) and Transperfect Translations, Inc.
v. Leslie, 594 F.Supp.2d 742, 749 (S.D. Tex. 2009).)
However, a Texas court does not enforce a choice of law provision where:
Another jurisdiction has a more significant relationship with the parties and the
transaction than the selected state.
Another jurisdiction has a materially greater interest than the selected state.
The other jurisdiction's fundamental policy would be breached by applying the law of the
selected state.
(Transperfect Translations, 594 F.Supp.2d at 749-51.)
The US Court of Appeals for the Fifth Circuit and the Texas supreme court have adopted the
Restatement (Second) of Conflict of Laws § 188 factors to determine whether a state has a
more significant interest than the chosen state, including:
The place where the contract is made, negotiated, and performed.

The location of the subject matter of the contract.
The parties':
domicile;
residence;
nationality;
place of incorporation; and
place of business.
(Cardoni, 805 F.3d at 582 and DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 678 n.2 (Tex. 1990).)
An employer choosing which state's law should govern should generally choose the law of a
state that bears some relationship to the employment relationship. At a minimum, there
should be some reasonable basis for the choice of law. For example, the state where the
employer is located or where the job duties are performed is a reasonable basis for choosing
the law of that state. If there is no reasonable basis for the choice, the governing law provision
may not be enforceable.
Other considerations for the employer selecting among governing state law choices for which
there is a reasonable basis include:
Employer-friendly law in one state over another.
The convenience to the employer of litigating disputes in a particular state.

Familiarity with a particular state's law.
An employer adapting this agreement should consider whether it prefers to seek enforcement
in one jurisdiction exclusively or to allow for some flexibility in enforcement jurisdictions (in
which case, include the optional "non-" in the bracketed language above). Likewise, if the
employer prefers enforcement in the courts of a specific county within a state, include the
bracketed language with reference to the county of choice. Otherwise, omit the optional
county language.
For an in-depth discussion of the interpretation of choice of law clauses, as well as drafting and
negotiating tips, see Standard Clauses, General Contract Clauses: Choice of Law and Practice
Note, Choice of Law and Choice of Forum: Key Issues.
Note: Entire Agreement
Entire Agreement
The employer should review all existing agreements between the employee and the employer
to ensure that no other contractual obligations govern the subject matter of this agreement.
To the extent that an existing agreement addresses topics covered by this agreement (for
instance an employment agreement or a confidentiality agreement), this section of the
agreement should be modified to:
Make specific reference to potentially inconsistent provisions in other agreements.

Clarify which agreement controls if provisions conflict.
If the employer wants the provisions of this agreement to take precedence, the employer
should use the first bracketed alternative language. If the employer wants the provisions of a
different agreement to take precedence, it should use the second bracketed alternative. If
there are no other agreements that potentially conflict, the employer can eliminate the
bracketed language.
Note: Severability
Severability
Employers routinely include severability clauses in non-compete agreements, particularly if
the agreement contains restrictive covenants. Texas courts generally both:
Honor severability clauses (Gen. Devices, Inc., v. Bacon, 888 S.W.2d 497, 503 (Tex. App.—
Dallas 1994, writ denied)).
Blue pencil (more commonly referred to in Texas as "reformation") non-competes that do
not meet statutory criteria. However, employers' relief is limited to injunctive relief (Tex.
Bus. & Comm. Code Ann. § 15.51(c)).
An unenforceable non-compete clause may render a severance agreement unenforceable
where the two agreements are mutually dependent promises (see Sheline v. Dun & Bradstreet
Corp., 948 F.2d 174, 177-78 (5th Cir. 1991)). For more information on Texas law regarding blue
penciling, see State Q&A, Non-Compete Laws: Texas: Question 6. For more information on
Texas law variations regarding enforcement of obligations to preserve confidentiality of trade
secrets, see State Q&A, Trade Secret Laws: Texas.
Note: Tolling
Tolling
A tolling provision adds an extra layer of protection to an employer if an employee breaches a
non-compete obligation. It does so by suspending the start date for the restricted period until
after the employee has stopped violating the contract or during litigation of the issue.
Tolling provisions suspend the start date of an employee's obligation and therefore extend the
duration of the non-compete restriction. This is a particularly useful provision in non-compete
agreements because the duration of the restricted period is subject to rigorous judicial review.
Because tolling provisions extend the length of the non-compete obligation, they may be
looked on harshly by judges and juries evaluating the reasonableness of the duration of the
restriction.
Employers should not include a specific length of time in a tolling provision because Texas
courts have declined to grant an equitable tolling extension where the parties had agreed to a
certain tolling period that expired during the course of litigation (Sadler Clinic Ass'n. P.A. v. Hart,
403 S.W.3d 891, 898-99 (Tex. App.—Beaumont 2013, no pet.)).
Note: Attorneys' Fees
Attorneys' Fees
An attorneys' fees provision gives an employer the option to defray the cost of enforcement
and may signal to an employee that the cost of violation is too steep to be worthwhile. Texas
courts follow the default rule that parties pay for their own attorneys' fees regardless of the
outcome of the case. In general, parties may contractually modify the default rule (Epps v.
Fowler, 351 S.W.3d 862, 865 (Tex. 2011).) However, Texas courts have held that the Covenants
Not to Compete Act prohibits employers from recovering their attorneys' fees in suits to
enforce their rights under the Act (Glattly v. Air Starter Components, Inc., 332 S.W.3d 620, 645
(Tex. App.—Houston [1st Dist.] 2010, pet. denied)). Employers may yet choose to include an
attorneys' fees clause to signal to an employee that the cost of violation is too steep to be
worthwhile.
Where a Texas court reforms a non-compete agreement, the employer may not recover
damages, including attorneys' fees (Perez v. Tex. Disposal Sys., Inc., 103 S.W.3d 591, 594 (Tex.
App.—San Antonio 2003, pet. denied)). The employer is limited to injunctive relief (Tex. Bus. &
Com. Code Ann. § 15.51(c)).
Note: No Preparation for Competition
No Preparation for Competition

Despite common law or statutory prohibitions against unfair competition, many jurisdictions
do not prohibit employees from engaging in preparations for competitive activity during the
tenure of their employment if they continue to fulfill the obligations of their existing
employment. However, employers may include a contractual provision that prohibits
employees from preparing to compete. This is not a common clause in non-compete
agreements and may be difficult to enforce in practice, so employers should only include this
option if it is likely to be enforced.
Each employee owes the employer a fiduciary duty. Part of that duty is the duty not to
compete with the employer. However, an employee that prepares for future competition with
the employer does not violate the employee's fiduciary duty. (Abetter Trucking Co. v. Arizpe,
113 S.W.3d 503, 510 (Tex. App.—Houston [1st Dist.] 2003, no pet.).)
Note: Notice
Notice
This optional clause creates an additional disincentive for an employee to engage in
competitive activity, but may create evidence of the employer's imposing an unreasonable or
unduly burdensome requirement on the former employee.
However, a notice provision also may reduce the employer's liability risk if it decides to send a
continuing obligations letter to the employee's new employer. For sample continuing
obligations letters, see Standard Documents, Continuing Obligations Letter to Departing
Employee and Continuing Obligations Letter to New Employer.
Note: Employee's Signature
Employee's Signature
The employer must ensure that the employee signs the non-compete agreement either in
hard-copy or electronically. Employers wishing to rely on electronic signatures should follow
procedures under applicable state law (see Practice Note, Signature Requirements for an
Enforceable Contract: The Uniform Electronic Transactions Act). The Texas Uniform Electronic
Transactions Act provides the requirements for enforceable electronic signatures (Tex. Bus. &
Comm. Code §§ 322.01-322.021). They also should ensure they can establish that the employee
signed the agreement and minimize the employee's ability to deny having signed it, such as by
using multi-factor authentication or having the employee sign from their home computer.
Some state laws now require that employers provide advance notice of the non-compete
before employment begins. However, in some states, a non-compete agreement is not
enforceable against a prospective employee. Employers therefore generally should instruct
the employee not to sign the agreement before they have entered an employment
relationship. Texas does not have such requirements.
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Employee Non-Compete Agreement (TX)

A Texas compliant agreement between an employer and an employee limiting an

Note: Read This Before Using Document

Read This Before Using Document

Is supported by adequate consideration (see Drafting Note, Consideration).

is of a reasonable duration (see Drafting Note, Duration of Restriction);

Includes provisions that supplement the restrictions on unfair or unlawful competition

the solicitation of the employer's employees (see Drafting Note, Non-Solicitation of

Special Rules for Attorneys and Medical Professionals

As part of a settlement agreement, except a settlement of a disciplinary proceeding

(TX ST RPC Rule 5.06.)

Provides for a buy-out of the covenant:

by the physician at a reasonable price;

in the case of an inability to agree, by a court-appointed arbitrator whose decision

Texas law disfavors non-compete agreements so employers should take additional

Note: Defining Employer

Promotion to a new position offering supplemental compensation or other benefits, or

not negligible; and

a payment the employee is not otherwise entitled to receive.

Note: Trade Secrets and Confidential Information

Trade Secrets and Confidential Information

Non-compete agreements should define confidential information consistently with

If the employer values a certain category of information and intends to protect it

What information gives the employer a competitive advantage.

What information makes the employer's business model, products, or services

Likewise, the lists of the employer's relevant third-party associates (whose

National Labor Relations Act

Employers also should consider including a Section 7 disclaimer (also known as a

The precise boundaries of permissible confidentiality provisions have been in flux

Practice Note, Employee Electronic Communications Under the National

Note: Disclosure and Use Restrictions

Disclosure and Use Restrictions

Notice of Immunity Under the Defend Trade Secrets Act of 2016

In confidence and solely to report or investigate a suspected violation of the law:

to a federal, state, or local government official; or

In a complaint or other document filed under seal in a lawsuit or other proceeding.

(18 U.S.C. § 1833(b)(1).)

Files any document containing the trade secret under seal.

(18 U.S.C. § 1833(b)(2).)

An employer alternatively may provide the required notice by reference to a policy

Provides notice of the DTSA's immunity provisions.

(18 U.S.C. § 1833(b)(3) .)

Authorized Communications with Securities Regulators

Note: Restrictive Covenants Acknowledgment

Restrictive Covenants Acknowledgment

Employers should customize this Standard Document based on the specific

Constant and habitual customers because of its local position.

(Marsh USA, 354 S.W.3d at 777-78.)

Trade Secrets and Confidential Information

Can be obtained readily from sources other than the employer.

(DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 684 (Tex. 1990).)

That derives independent economic value, actual or potential, because it is

generally known; and

Is the subject of reasonable efforts under the circumstances to maintain its

(Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(6).)

Unique, Special, or Extraordinary Services