Can I require employees to sign non-compete agreements in Texas? What are the requirements?

Yes, you can require employees to sign non-compete agreements in Texas, but there are certain requirements that must be met for the agreement to be enforceable.

Requirements for Enforceability of Non-Compete Agreements in Texas

According to Tex. Bus. & Com. Section 15.50, a non-compete agreement is enforceable if it meets the following criteria:

• It is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made.
• It contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.

Additionally, for non-compete agreements relating to the practice of medicine, there are additional requirements that must be met. According to Tex. Bus. & Com. Section 15.50(b), a non-compete agreement relating to the practice of medicine is enforceable against a person licensed as a physician by the Texas Medical Board if it complies with the following requirements:

• The covenant must not deny the physician access to a list of his patients whom he had seen or treated within one year of termination of the contract or employment.
• The covenant must provide access to medical records of the physician’s patients upon authorization of the patient and any copies of medical records for a reasonable fee.
• The covenant must provide that any access to a list of patients or to patients’ medical records after termination of the contract or employment shall not require such list or records to be provided in a format different than that by which such records are maintained except by mutual consent of the parties to the contract.
• The covenant must provide for a buyout of the covenant by the physician at a reasonable price or, at the option of either party, as determined by a mutually agreed-upon arbitrator or, in the case of an inability to agree, an arbitrator of the court whose decision shall be binding on the parties.
• The covenant must provide that the physician will not be prohibited from providing continuing care and treatment to a specific patient or patients during the course of an acute illness even after the contract or employment has been terminated.

Other Relevant Information

Tex. Bus. Orgs. Section 21.110 permits shareholder agreements between two or more shareholders or between the corporation and one or more of the corporation’s shareholders, as permitted by Title 1, this chapter, or other law.

Tex. Bus. & Com. Section 15.51 outlines the procedures and remedies in actions to enforce covenants not to compete. A court may award the promisee under a covenant not to compete damages, injunctive relief, or both damages and injunctive relief for a breach by the promisor of the covenant. If the covenant is found to be ancillary to or part of an otherwise enforceable agreement but contains limitations as to time, geographical area, or scope of activity to be restrained that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee, the court shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time, geographical area, and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than necessary to protect the goodwill or other business interest of the promisee and enforce the covenant as reformed.

Tex. Nat. Res. Section 101.004 states that agreements and operations under agreements which are in accordance with the provisions in this chapter, being necessary to prevent waste and conserve the natural resources of this state, shall not be construed to be in violation of the provisions of Chapter 15, Business & Commerce Code, as amended.

Tex. Nat. Res. Section 101.002 states that none of the provisions in this chapter restrict any of the rights that a person now may have to make and enter into unitization and pooling agreements.

Conclusion

In summary, you can require employees to sign non-compete agreements in Texas, but the agreement must meet certain requirements to be enforceable. Additionally, there are other relevant laws and regulations that may impact the enforceability of non-compete agreements in Texas.

Jurisdiction

Texas

• Labor