By Shaan A. Rizvi — The New York Times ran a fascinating article about the proliferation of non-competition clauses in employment agreements throughout the country. As the article correctly notes, non-competition agreements, or non-competes, were traditionally used most often in technology related professions, where employers feared that employees might walk away with company trade secrets and use them for a benefit of a competitor. More recently, however, all kinds of employers – including summer camps, lawn control companies and hair styling salons – have been using them (the summer camp claims its “intellectual property is the training and fostering of [its] counselors”). The increasing proliferation of non-competes has, predictably, led to all kinds of backlash from employees, including a proposal in Massachusetts (already signed by Governor Patrick Deval) to ban them outright except in very limited circumstances. Critics of non-competes argue they stunt innovation and competition, whereas proponents argue that they actually spur economic growth by encouraging companies to invest in their employees.
The full text of the article can be found here.
The debate isn’t likely to end anytime soon, but non-competes are safe for the time being in Texas. The Texas Business and Commerce Code states generally that non-competes are enforceable if they contain limitations as to time, geographical area, and scope of activity to be restrained that are (1) reasonable and (2) do not impose a greater restraint than necessary to protect the employer’s goodwill and business interests. Given the broad legal language, as well as the increasing proliferation of non-competes, savvy employers may want to make it a regular practice to question new hires about whether they’re under a non-compete. Such a move up-front reduces the likelihood of an employer being dragged into unnecessary litigation by an employee’s former employer who claims the employee is violating his or her employment agreement.
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