Errors to avoid when constructing your noncompete agreement

On Behalf of | Mar 25, 2021 | Business Law

The concept of a noncompete agreement in Texas may seem like a great solution to protect your business and its assets. However, the agreement is only as good as the wording in it. Do yourself a favor, and avoid these common errors that can void your noncompete agreement.

No consideration

In a court of law, the term “consideration” refers to something of value. When an employee signs a noncompete agreement, he or she must receive some sort of consideration. This could be in the form of money, vacation days or anything of true value to the employee. If you have an existing employee sign a noncompete agreement without giving him or her some consideration, a court may not enforce the agreement during business litigation.

Restricting competition for too long

It may seem pretty simple to draft a noncompete agreement that restricts an employee from competing against you for the rest of his or her life. The reality is that most courts won’t uphold that type of contract due to its duration. You may only restrict competition to protect your business’s interests for a reasonable amount of time. An appropriate reasonable amount of time will vary depending on the industry. However, common times range from six months to a couple of years.

Too large of a territory restricted

You may want to restrict a former employee from working in the same industry within a large distance from your business. However, this isn’t usually achievable in a court of law. Rather, you should only restrict competition in a reasonable area. For example, if most of your customers are in Austin, then it’s considered reasonable to restrict Austin in your noncompete agreement. Restricting Fort Worth would be considered too large of a territory.

Drafting a noncompete agreement can be a great way to protect the interests of your business in the event an employee leaves. However, you need to ensure that you avoid the common errors that we went over above. Enlisting the help of an attorney to write your noncompete agreement can help to identify even more errors that you’ll want to avoid.