The Common Law

I was laid off by a technology start-up. During the termination paperwork process, I noticed a statement that I had to sign stating that I was to agree not to work for any direct competitor for a period of 12 months from the date of my termination. Upon refusing, I was presented the stack of first day paperwork I signed showing that I signed this exact statement already. Can a company who let me go prevent me from making a living in the same field?

This is a timely question for the Austin job market. The devil is in the details surrounding the contract you signed, what training or information your employer shared with you after you signed, and what sort of work you will be doing in your new job. Currently, Texas law allows an employer to prevent a former employee from working in the same field, if:

1) the agreement is limited in time, geographic area, and scope of activity;

2) the limitations are reasonable and don't impose restraints greater than necessary to protect the business interest of the employer; and

3) the covenant is "ancillary to or part of an enforceable agreement at the time the agreement is made" – a highly technical legal issue that Texas courts have struggled with for many years.

Whether the limitations contained in a covenant not to compete are reasonable is an issue that the court will decide. Courts can, and often do, rewrite unreasonable covenants to make them enforceable.

Historically, courts strongly scrutinized noncompete agreements and rarely upheld them. More recently, employers have had more success, especially when the employer has shared confidential company information with employees or has trained employees subsequent to the signing of the agreement. Noncompete agreements are increasingly common, especially in high tech markets like Austin.

In short, you will need a lawyer to review your contract, especially the limitations your employer wants to impose on your future employment, the circumstances in which you signed the contract, what sort of training or confidential information your employer gave you after you signed the noncompete agreement, and what sort of work you will be doing for your new employer.

Employers concerned with protecting their trade secrets, confidential information, and other business interests need to carefully consider their employment policies and agreements. A sound employment strategy should be developed and may integrate a combination of noncompete agreements, confidentiality and nondisclosure agreements, nonsolicitation agreements, as well as considerations for the protection of your company secrets under Texas trade secret law.