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Buried in some employment agreements, there may lurk a provision that attempts to force the employee to waive all defenses to the non-compete clause. Is this legal?
At Gardner Employment Law, we often review contracts that include very broad non-competes that prevent the employee from working almost anywhere. This article addresses the problem when a contract prevents the employee event from mounting a defense against a very broad non-compete.
Can an Employee Be Forced to Waive All Defenses to a Non-Compete?
The short answer is “no.” That waiver would be allowing the employer to do what the non-compete statute says cannot be done. The Texas Supreme Court held many years ago that such a contract would be contrary to public policy and therefore void.
We handled a case like this once. A senior executive at a large corporation signed several compensation and incentive agreements over the years. Each document included a very broad non-compete clause.
Tucked at the end of the non-compete section in each of the contracts was a provision stating that the executive waived “any and all defenses to enforcement” of the non-compete. We researched all of the court opinions on the subject of non-competes. We found that there are no Texas cases directly addressing a clause that waives all defenses to a non-compete agreement. But older Texas cases discussing public policy provide helpful guidance.
In Texas Employers’ Insurance Association v. Tabor, the Texas Supreme Court explained an important principle of contract law: A contract to do a thing which cannot be performed without violating the law is void. In other words, parties cannot contract around statutes that prohibit certain conduct. If a contract requires something the law does not permit, courts may refuse to enforce it.
Another Texas case, Ussery v. Hollebeke, involved an oil and gas agreement that required the parties to violate a state statute. The court held that contracts that contain language contrary to the statute are against public policy and therefore invalid.
Applied to non-competes, these cases suggest an important argument:
- If Texas law requires restrictive covenants to be reasonable, a contract provision that prevents an employee from challenging an unreasonable restriction may itself conflict with public policy.
What Should Employees Look For in Their Non-Compete Agreements?
Employees should pay close attention not only to the existence of a non-compete, but also to how far it goes. As we have explained in “Getting Around a Non-Compete,” the restrictions on your future work activities cannot cover every type job at another company. The restrictions must be reasonable.
And – look for any section that seems highly unusual, such as forcing you to waive or give up all your defenses to the non-compete. Courts may refuse to enforce provisions that conflict with statutory protections or public policy.
Understanding these issues before signing – or before leaving a job – can make a significant difference in how much flexibility you have in pursuing the next opportunity.
What This Means
Non-compete agreements can limit where and how employees work after leaving a company. But employers cannot always enforce restrictions exactly as written, especially if they go beyond what the law allows.
If you have questions about a non-compete agreement or whether certain provisions may be enforceable, we can help.