Sometimes business litigation occurs between two companies. Other times, organizations may have to take legal action against individuals. Specifically, some Texas businesses may eventually end up embroiled in legal disputes with former employees. Workers sometimes engage in misconduct that violates the terms of their employment agreement and that could endanger the business that previously employed them.
Those who are privy to a company’s operating practices and trade secrets can potentially use that information for personal gain. They might seek out a job with a direct competitor or start a competing business in the same industry. Organizations usually want to limit how much exposure they have when hiring new talent.
Noncompete agreements are a common tool used by employers to prevent unfair competition by former employees. There has been a lot of controversy about noncompete agreements in recent years. Can businesses in Texas still enforce noncompete agreements when former employees start companies or accept jobs with competitors?
Noncompetes remain enforceable in Texas
There has been a lot of discussion at the national level about eliminating noncompete agreements. The Federal Trade Commission (FTC) has expressed concern about the widespread use of noncompete agreements and how they have a chilling effect on employees.
The FTC specifically referenced how these agreements may prevent people from seeking better job opportunities or pursuing entrepreneurial ambitions. The FTC attempted to ban noncompete agreements early in 2024. However, a federal judge here in Texas recently ruled in a case related to that ban. The judge determined that the FTC overstepped its authority by trying to implement a sweeping nationwide ban on noncompete agreements in employment contracts.
For the time being, the legality of noncompete agreements exists on a state-by-state basis. In Texas, noncompete agreements negotiated as part of a valid employment contract and with appropriate limitations in place remain enforceable. Employers have to initiate civil litigation and can seek damages, the enforcement of a penalty clause or an injunction prohibiting certain conduct.
Business litigation related to the enforcement of noncompete agreements can be important for the protection of trade secrets and other intellectual property. Taking legal action against former employers who have engaged in questionable career development moves may help a company protect its competitive advantages.