How can you determine whether your non-compete restricts where you work? With online work, the geographical area restriction may be different.
Gardner Employment Law analyzes non-compete restrictions and helps clients know their limitations. Armed with knowledge, you can make better career choices. If you need help understanding the terms of your non-compete, contact us.
How is the Geographical Area Determined in a Texas Non-Compete?
Non-compete geographic restrictions must be reasonable, according to the Texas Business and Commerce Code 15.50. We explained the concept of reasonableness in “A Non-Compete Restriction Must Be Reasonable.” A Texas court will not enforce non-compete agreements unless they follow the statutory requirements for reasonableness. Geographic limitations are one of those requirements that must be reasonable.
The trial court looks at the specified regions or radius contained in the non-compete to determine whether the geographic scope is reasonable. Generally, courts find that an agreement is reasonable if the geographical restriction coincides with the area where the employee previously worked. The employee cannot work for a competitor in that same area. This prohibition from working in the same geographical area protects the employer’s business interests, such as the company’s trade secrets or confidential information.
However, the need to protect the employer does not entirely override the employee’s rights. The courts strike a balance. If covenants not to compete are too broad or burdensome on the employee, the court may decide to not enforce agreements. For example, if the geographical area is too broad, courts will reduce the territory to a reasonable area, usually the same area where the employee worked.
Forbes notes that many companies will create non-compete agreements which employees never question out of fear. This can include non-compete agreements that are unreasonably overbroad. But you don’t have to fear losing your job or a new job offer since employers generally know the statutory requirement of reasonableness. The negotiation process is crucial. If your agreement spans the entire state or entire regions where your company has never done business or geographical territories where you never worked, your agreement may not hold weight in court.
Can a Non-Compete Prevent an Employee from Working Remotely Elsewhere?
Remote work raises new challenges that legislators likely did not anticipate when enacting non-competition statutes. Since employees working remotely usually work online, this means that the employee’s activities can span multiple or vast regions. This poses the question as to which state’s law controls since non-compete laws are state specific.
This was the primary issue in Medtronic, Inc. v. Walland. In a long opinion, the court decided that California law applied, rather than New York where the case had been filed. Applying California law, the court ruled for the plaintiff, stating that enforcing the non-compete agreement likely would bar him “from working anywhere else in the country that overlaps with his specialty.” When a geographical area in a non-compete agreement is too broad, it may not be enforceable.
Courts focus on where the employee’s activities occurred when he or she worked for the previous employer. This principle can be applied when analyzing a position which requires you to perform your activities online in a distant location.
We counseled a client who worked in IT support and had signed a non-compete agreement. His activities had covered only Texas and New Mexico. He was offered a position with a new company that permitted him to continue living in Houston, Texas, but the new job duties would require working online to support companies located on the East Coast. The geographical area of his IT work would be different, and therefore taking the new job would not violate his non-compete agreement. He took the offer and then resigned from the old company.
What Should I Know Before Signing a Non-Compete Agreement in Texas?
As we discussed earlier, there are several key elements to consider when it comes to the enforceability of a non-compete in Texas. The geographical area is just one element to consider.
Before you sign any new non-compete agreement, ask the following key questions to determine whether the restrictions exceed what is necessary to protect your employer’s business interests:
- Is the geographical area extremely broad or undefined?
- Is the time period so long that your skills will be obsolete when the period ends?
- Are the restricted activities duties that you do not perform?
- Does the agreement overall restrict you more than the employer needs to protect its trade secrets or its goodwill?
Even if you have already signed a non-compete agreement that is overbroad, you can still contest its enforceability in court like Joseph Walland did with Medtronic, Inc. Ideally, it is better to be proactive to avoid the many thousands of dollars required to litigate the issue. Remember that each document in the workplace can have future consequences. Inform yourself of your rights before you sign a document so you can avoid problems.
Let Us Review the Geographical Area in Your Non-Compete
If you are unsure about whether the geographical area or any other element in your non-compete is unreasonable, let us review your non-compete. As our IT support client did, you may learn information that can help your career in the long run.