Business owners in Texas often face a common challenge: protecting their business interests when employees leave. Two main tools help with this – non-compete and non-solicitation agreements. But what makes them different? Let’s break down non-compete vs non-solicitation agreements in Texas and help you understand which one fits your needs.
What Is a Non-Compete Agreement?
A non-compete agreement stops former employees from working for competitors or starting competing businesses for a set time period. In Texas, these agreements must follow specific rules to be valid. The agreement needs to be reasonable in its time period, which typically ranges from one to three years. It must also set clear boundaries for the geographic area where the employee can’t compete. Finally, it should clearly define what activities are restricted.
According to the Texas Business and Commerce Code Section 15.50, non-compete agreements must be supported by valid consideration and protect legitimate business interests to be enforceable. This means your business needs to give something of value in exchange for the employee signing the agreement.
What Is a Non-Solicitation Agreement?
Non-solicitation agreements take a more focused approach to business protection. Instead of stopping someone from working in the industry altogether, these agreements prevent specific actions. A former employee can’t approach your current employees about new job opportunities. They also can’t contact your customers or clients to take business away from you. The agreement also stops them from using your confidential information to gain advantages in the market.
Unlike non-compete agreements, these contracts don’t prevent someone from working in the same field. They simply put limits on who they can do business with after leaving your company.
Key Differences Between Non-Compete and Non-Solicitation
Understanding the difference between non-compete and non-solicitation agreements helps you make better choices for your business. The main differences come down to three key areas:
The scope of restriction sets them apart first. Non-compete agreements cast a wider net by preventing work in the same industry or for competitors. Non-solicitation agreements only restrict contact with specific people or the use of certain information.
Courts also treat these agreements differently. They often review non-compete agreements more strictly because they limit someone’s ability to earn a living. Non-solicitation agreements typically face less scrutiny because they’re more focused and less restrictive.
Time limits also vary between the two. Non-compete agreements usually last one to three years at most. Non-solicitation agreements can sometimes run longer because they don’t completely stop someone from working in their field.
Which Agreement Do You Need?
Your choice depends on what you want to protect. A non-compete agreement works best when you need to protect trade secrets, operate in a highly competitive industry, or invest heavily in employee training. Your employees should have access to sensitive information that could harm your business if shared with competitors.
On the other hand, a non-solicitation agreement might be your better choice if you mainly want to protect client relationships and keep employees from taking team members with them when they leave. These agreements often help maintain better relationships with departing employees while still protecting your interests.
Legal Requirements in Texas
For either agreement to work in Texas, you need three main elements: valid consideration, reasonable limitations, and protection of legitimate business interests. The Texas Supreme Court has consistently held that these agreements must follow the Texas Business and Commerce Code Section 15.50-15.52.
Best Practices for Implementation
Making your agreement effective starts with putting it in writing and using clear, specific terms. Set reasonable time limits and clearly define any geographic boundaries for non-competes. List out protected customers or information that can’t be used. Most importantly, have a legal professional review your agreement before using it.
Get Professional Help with Your Business Agreements
Do you need help choosing and creating the right agreement for your business? The Law Office of Kyle J. Moore, PLLC offers legal guidance in business law, including drafting and reviewing non-compete and non-solicitation agreements. Our team also handles personal injury cases, real estate law matters, and various other legal services to support Texas businesses and individuals.
Contact us today to protect your business interests with properly drafted agreements that hold up in Texas courts. Let our experience in business law, personal injury, and real estate work for you.