FTC Considering Crackdown on Non-Compete Agreements

Houston Non-Compete Attorneys

Antitrust laws help regulate the conduct of businesses in order to promote fair market competition for the benefit of consumers. Recently, the U.S. Federal Trade Commission (FTC) announced it was considering a rule limiting businesses from pushing their employees to sign non-compete agreements preventing them from working at rival companies.

Upon hiring, workers are sometimes pushed to sign non-compete agreements, which bar them from quitting their current positions for similar work elsewhere at a competing business. This practice has been incredibly common in white collar professions, such as in the medical industry, and in tech-centered jobs in order to protect trade secrets and encourage worker training. Now, these agreements have become more commonly integrated into contracts for low-paying positions that require minimal training.

Asking minimum wage job workers to execute non-compete agreements has been hotly contested. States across the country limit or ban non-compete agreements. Eighteen state attorneys general – including those in California, Illinois, and Massachusetts – have urged the FTC to stop the use of these agreements.

Texas Non-Compete Agreements

The use of non-compete agreements varies from state to state. In Texas, employers have the right to utilize non-compete agreements; however, they are only enforceable if supported by valid consideration, and if reasonable in time, geographic scope, and activities restrained.

Normally, Texas law disfavors contracts and arrangements that restrict employee mobility. As stated in the Texas Free Enterprise and Antirust Act of 1983, each contract restraining free trade or commerce is unlawful; however, the Texas legislature established an exemption permitting non-compete agreements in certain circumstances.

Valid consideration

For non-compete agreements to be enforceable in Texas, valid consideration must be made. Essentially, in exchange for the employee agreeing not to compete with the employer, the employer must provide something of value to the employee; otherwise the non-compete agreement isn’t valid.

Reasonable in time

In Texas, non-compete agreements can only restrict an employee for a limited, reasonable time or the duration the worker has been employed at their current position. Typically, a reasonable amount of time is restricted to two full years.

While an employer may not put indefinite restrictions on a former employee’s professional path, the amount of time required could be extended for higher-level executives with access to sensitive, important information.

Geographic scope

Geography in non-compete agreements refers to the location of the employee’s current workplace. This means a non-compete agreement can prevent an employee working in Houston from being employed with a competitor in the same city. However, it cannot prevent the employee from seeking similar opportunities elsewhere, like in New York or California, for example.

Activities to be restrained

The activities a Texas non-compete agreement can restrain are the employee’s job responsibilities. For example, a non-compete agreement may prevent a security guard at one company from moving to a similar position at a competitor. However, a non-compete agreement cannot prevent the employee from pursuing work in an unrelated field at the competitor’s company.

Houston Commercial Litigation Attorneys

Businesses often look to non-compete agreements to protect valuable information like trade secrets from being leaked or exposed. At Feldman & Feldman, we understand each business has its own unique items requiring protection. If your business is facing a dispute that requires the insight of an experienced commercial litigation attorney, contact Feldman & Feldman today.