Are Tech Noncompete Clauses Enforceable in Texas?

Updated November 1, 2023
10 min read
Are Tech Noncompete Clauses Enforceable in Texas?

Introduction

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 in Texas

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.

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Reasonability

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.

Changing tides

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.

Remote work

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.

Potential Conflicts with Employers

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

  • Aerospace;

  • Biomedical sciences;

  • Medical devices;

  • Pharmaceuticals;

  • Robotics;

  • Smart devices/Internet of things.

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.

Talk To a Lawyer

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.

Article by
Alex R. Hernandez Jr.
Alex R. Hernandez Jr. PLLC Austin

Alex Hernandez of Alex R. Hernandez Jr. PLLC is a Texas and New York licensed trial and litigation lawyer with over 20 years of experience in business law, real estate law, personal injury, automotive accidents, work-related injury, wrongful death, mass torts, insurance litigation, and consumer law, and other practice areas. Alex R. Herndandez Jr. PLLC is a law firm of over 100 attorneys that serves the greater Austin, TX region, with offices located nationally. The law firm offers video consultations for most cases and payment plans for clients in need. Many cases are taken on a contingency fee. The firm proudly serves English and Spanish-speaking clients.

Frequently Asked Questions

Are tech noncompete clauses enforceable in Texas?

Yes, tech noncompete clauses are generally enforceable in Texas if they meet certain criteria. These covenants must be part of an otherwise enforceable agreement, and the restrictions implemented should not impose greater restraint than necessary to protect the legitimate business interests of the employer. Furthermore, the clause must be reasonable in terms of geographical area, time period, and scope of activity to be restrained.

Can a noncompete clause prevent me from working anywhere in Texas?

The geographical restriction in a noncompete agreement should be specified but can vary based on each situation. It should ideally cover the area where the employer operates or has substantial business interests. A clause that prevents an employee from working anywhere in Texas may be deemed too broad and, therefore, unenforceable unless the company has substantial business all across Texas.

How long can a noncompete clause last in Texas?

The length of the noncompete clause should be reasonable and cannot impose greater restraint than necessary. There is no specific limit set by the state, but courts have generally upheld noncompete terms ranging from six months to two years. However, the exact duration may vary depending on individual circumstances.