As you probably know, most major corporations have a keen interest in protecting trade secrets, keeping existing customers and expanding business opportunities. Each of these interests might encourage company executives to demand noncompete agreements from their employees.
According to the Federal Trade Commission, non-compete agreements can be bad for workers, as they can reduce earning potential, prevent entrepreneurism and stifle competition. At least for now, most noncompete agreements are enforceable in Texas, however. Nevertheless, for such an agreement to pass legal muster, it must attach to something else.
What must noncompete agreements attach to?
Noncompete agreements cannot be standalone contracts. Indeed, for a non-compete agreement to be legally enforceable, it must attach to an independent and enforceable agreement. Put differently, there must be another enforceable agreement between the employer and the employee, such as an employment contract or an agreement to offer training opportunities.
Can non-compete agreements attach to severance agreements?
It is against public policy for a non-compete agreement to attach exclusively to the exchange of money. Therefore, if a severance agreement only offers financial compensation, attaching the noncompete provision to it might not work. To get around this, an employer may include language in the severance agreement that includes confidentiality or another provision. These additional requirements are likely to pull the noncompete agreement over the threshold for legal legitimacy.
Do noncompete agreements work for at-will employees?
If an employee has an employment contract for a fixed term, it is probably acceptable to attach the noncompete agreement to it. These agreements can work with at-will employment also, though. While the at-will nature of employment is not enough for a noncompete provision to attach to, employer promises of training, access to company information or other similar matters can render the at-will employee’s noncompete agreement legally valid.
Ultimately, for employers to be safe when structuring noncompete agreements, they must look past money and attach the agreements to something more legally justifiable.