Texas Covenant Not to Compete for a Construction Business - Noncompetition
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FAQ
The well-known general rule is that a covenant not to compete is only enforceable if its terms are reasonable and necessary to protect the legitimate business interests of the employer.
Even if you remain classified as a contractor, a non-compete clause may not be enforceable. Independent contractors are expected to be experts in their chosen field and are likely working for multiple companies at once. If one company attempts to enforce a non-compete clause, your ability to find work may be affected.
In a non-compete agreement, you will be taxed at ordinary income levels on the value of the non-compete but you will not be subject to self-employment tax. Your savings is the value of the self-employment tax or 15.3%.
In its most recent case on the subject, the Texas Supreme Court ruled, that in certain circumstances, non-compete agreements are enforceable. As a result, although an employee may lose her job, the employer with a non-compete agreement will prevent her from walking across the street to work for a competitor.
Independent contractors in Texas, and those who hire them, often wonder whether independent contractors can be bound by a non-compete agreement under Texas Law. The answer is yes. In Texas, there is no prohibition against binding an independent contractor to a non-compete agreement.
The answer is: A non-compete agreement IS enforceable in Texas if it is supported by valid consideration, and is reasonable in time, geographic scope, and activities to be restrained. A Texas employer can utilize a non compete agreement to protect company goodwill and confidential information.
A Restraint of Trade clause can never be inserted in a true Independent Contractor agreement - it is quite simply unenforceable. You cannot restrain your plumber or painter or electrician from taking on other work, or from the painting the buildings of companies in opposition to you.
1. There must first, in every instance, be a separate enforceable agreement beyond the noncompete restriction itself. In other words, a standalone noncompete procured in return for a sum of money or other compensation is simply void as against Texas public policy. That is a naked restraint that will not be enforced.
Texas law provides that a covenant not to compete is enforceable only if it: is ancillary to or part of an otherwise enforceable agreement. contains reasonable limitations as to time, geographical area, and scope of activity.
The answer is: A non-compete agreement IS enforceable in Texas if it is supported by valid consideration, and is reasonable in time, geographic scope, and activities to be restrained. A Texas employer can utilize a non compete agreement to protect company goodwill and confidential information.