What to Think About Before Signing a Non-Compete Agreement

What to Think About Before Signing a Non-Compete Agreement

Scenario 1: You get a fantastic new job offer, quit your job, and arrive at your new job on the first day. You receive reams of paperwork to sign.  Working your way through it, you find a non-compete agreement. What should you do?

Scenario 2: You’ve worked at a company for many years.  Then—out of the blue—the company demands you sign a new document containing a non-compete agreement or risk losing your job. What should you do?

These scenarios happen every day. If they happen to you, here are things to think about before signing the non-compete agreement:

Do not assume that a non-compete agreement is not enforceable in Texas.

Far too often, people think that a non-compete agreement is not enforceable in Texas because this is a right to work state. People misunderstand what right to work means.  That Texas is a right to work state means you cannot be required to join a union as a condition of accepting a job in Texas; it has nothing to do with enforceability of a non-compete agreement. Yet the internet continues to spread this myth—and people continue to believe it.

Texas has a statute authorizing parties to enter into enforceable non-compete agreements. These agreement are enforced routinely in Texas.  The Texas statute is Tex. Civ. Prac. & Rem. Code §§ 15.50 et. seq.

Figure out whether the restriction is a “non-compete” or a “non-solicitation” clause.

There are different post-employment restrictions. A true non-compete would prohibit you from working in a defined industry or job for a particular period in a defined geographic area.

A non-solicitation clause prohibits you from soliciting either clients or employees of your former employer for a defined period and, sometimes, in a defined geographic area.

For example, if you were selling fire extinguishers in Texas, a non-compete might provide that you would not work for any other company selling fire extinguishers in Texas for two years after your employment ended.

A non-solicitation provision would say you would not solicit the business of or accept business from any company client or customer to whom you had contact while you worked at the company for two years after your employment ended.

The differences and distinctions are important.

Before you sign the agreement, figure out whether you can still make a living in your chosen profession if your employment ends.

What you must figure out before you sign a non-compete is whether you could still make a living in your chosen profession if your employment with that company ends.

This will often turn on the very specific language of the restriction and how it might define a “competitive” business. It also turns on the length of the restriction and the geographic area to which the restriction applies.

Sometimes, you might have to move to continue to work in your industry of choice.  In other cases, you might have to avoid doing business with certain customers for a particular period. Understand exactly what you would be able to do when your employment ends before you sign a non-compete.

Many people sign these agreements without thinking through the issues because they feel like they will get fired if they do not. But you can still be fired the day after you sign a non-compete agreement—and you’ll now be bound by it.

No one wants to be fired. But sometimes it is better to walk away from a job before signing a restrictive covenant.

Seek legal advice before you sign.

Don’t be afraid to ask an attorney to review a non-compete before you sign it. You may be paying for an hour or two of legal fees, but you’ll understand what will happen if your employment ends. You’ll know what your rights and obligations are.

That can help prevent you from making a more expensive mistake later and being sued for violating a non-compete or from being unable to find a new job in your industry for a period of time due to your restrictive non-compete.

At Johnston Tobey Baruch, we regularly review these agreements and can help you understand your options before you sign one.  If you have signed a non-compete and need help knowing what your legal rights and obligations are, we can help you.