Are Tech Noncompete Clauses Enforceable in Texas?

Tech is no longer confined to the Bay Area.

I’ve been in Austin for a while, so I’m not shocked when media outlets start proclaiming that Silicon Valley is losing its prominence and the future of tech is in Austin. Austin is the home of the SXSW conference and a magnet for big names like Tesla and Oracle. But the booming tech future in Texas brings up one question we’re going to hear a lot more often: what about noncompete clauses?

Noncompete clauses make sense in theory. For example, if a company invests in a new medical device that will dramatically change the industry, an employee taking that knowledge elsewhere could sink the entire business before the device even hits production. Historically, courts have found noncompete clauses enforceable when a former employee’s actions could be detrimental to their old company. Yet the digital world of coding and app development makes things complicated.

Business lawyers always reference the Texas Covenants Not To Compete Act. The relevant passage states that noncompete clauses become unenforceable when they are not reasonable and impose a greater restraint than is necessary. But, as anyone can guess, it’s not always clear what “unreasonable” or “greater than necessary” means.

For example, it might be unreasonable to ask a coder not to compete for any other development job — that’s far too broad. Some would argue that any development experience in an emerging field, such as VR, could be a competitive advantage. Startups live and die based on how quickly they can bring an app to market that no one else has published.

In practice, Texas has been relatively lenient regarding noncompete clauses, especially post-pandemic. But nationally, the landscape is changing. The current White House administration has favored more worker mobility and less stringent rules, and many states have adopted policies that protect individuals instead of companies.

Notably, the State of California does not enforce any noncompete clauses. As more California tech companies and startups move to Texas, their employees will likely expect similar freedoms. It will become increasingly unpopular to issue noncompete clauses as what’s considered “reasonable” gets smaller and smaller. Soon, even the mention of noncompete may seem unreasonable.

Another complicating factor is that many companies now allow remote work. It used to be the case that someone could live in one city and then physically move across the state, so far away that a noncompete agreement would no longer come into play.

Now, someone can be in the exact physical location and log into a different company’s network. It may seem overly restrictive to say that a former employee cannot work anywhere else in the world just because they happen to live in the same city as their old company.

In addition, employees of a Texas-based company may not reside in Texas. I predict these changes to the norms of work environments will have a ripple effect over the next decade regarding how courts view an employee’s rights.

Noncompete — or nondisclosure — agreements are common in the following list of highly technical fields:

Any field that involves years of research or patents will likely have some form of a noncompete. So, if the primary digital startups push the culture to become more relaxed in the enforcement of noncompete clauses, some employers will likely be slow to adjust their practices. Legal challenges are expected. 

Over the next few years, we’ll have to closely monitor how Texas courthouses interpret the laws already on the books and what precedents they set for future cases in the tech field.

Ultimately, talking to a business lawyer in Austin — or whichever city you end up in — is your smartest move. It’s best to understand a company’s requirements and expectations before you begin work. Understand how they’ll view intellectual property ownership and what will happen if you leave.

Keep in mind that as much as you love your current startup, you may end up with an attractive job offer a year from now. Being part of a growing field means your skills will be in demand, so it’s best to know up-front what challenges you may face when leaving.

If you are currently in the process of leaving an employer and are concerned that a noncompete clause may overstep its bounds, seeking a qualified attorney will help you understand your options.

Tech is all about innovation, and no one should feel unfairly constrained. So, while noncompete clauses may be enforceable in some cases, you may have more freedom than initially thought.