Businesses of all sizes are looking increasingly to non-competition agreements as a means to retaining key employees, protecting confidential information and preserving valuable customer accounts. The concept is simple:  an employee agrees that, for a specified period of time after leaving the employer, he or she will not compete with or work for a competitor of the employer.

A typical agreement might prohibit John Smith from competing directly or indirectly with his employer, ABC Corp., or working for a competitor of ABC Corp., within Texas, for a 24-month period following the termination of Mr. Smith’s employment with ABC Corp.

Why Have an Agreement?

At first glance, such agreements may seem to make a lot of sense. The sudden loss of a key salesperson, for example, often creates a triple whammy.  First, a seasoned member of the sales team is gone, along with her in-depth knowledge of your business, your products, your pricing practices and your customers.  Second, the good will and positive customer relationships that the employee has developed over time are now gone.  Third, if the salesperson has been recruited by a competitor, a significant risk exists that she will be converting your accounts to your competitor’s while you spend considerable time recruiting and breaking in a replacement.  Losing an experienced member of management or R&D to a competitor can be equally devastating.

The existence of a solid non-competition agreement can often serve to deter employees from seriously exploring a jump to a competitor. An employee who thinks that a court may keep him from successfully landing with a new employer, may not risk the leap.  After all, most employees will want to avoid costly litigation against their former employer.  At the same time, the presence of […]