Austin leads the nation in startup activity, and is home to more than 4,700 high-tech companies.  Last year, the Austin Technology Council predicted 11,754 new tech jobs within five years.

With new growth comes new opportunity and competition for top talent and an increase in non-compete agreements —an employment contract limiting the employee’s ability to subsequently work for a competitor.  If you work in the tech industry, chances are you’ve either signed a non-compete agreement, or will be asked to.  

Here is some of what you need to know:

In Texas (unlike other states), well-drafted non-compete agreements tend to be enforceable.  Texas courts apply certain tests when determining whether a particular non-compete agreement is enforceable.

First, any employee’s promise not to compete must be made in exchange for the employer providing some new “consideration” which can take the form of more money, stock options, specialized training, or providing the employee confidential or proprietary information.  

Second, the agreement must be reasonable and not overbroad or imposing a greater restraint than necessary to protect the employer’s goodwill or business interest.  Generally,  restrictions on an employee’s ability to compete must be limited (a) geographically and/or by customer base in certain circumstances, (b) temporally, and (c) in scope.  What might be reasonable for one company could be too broad for another.

Vigilance is required on both sides of the employer-employee equation.  An employer attempting to enforce an overly broad agreement might lose out on recovering damages otherwise available with a more narrowly drafted agreement.  On the other hand, an employee signing a non-compete agreement might possibly waive a future defense that the agreement was overbroad and unenforceable.

I’m not a lawyer – what’s a “TUTSA?” 

An employee contemplating a new opportunity must consider more than the non-compete.  Under the Texas Uniform Trade Secrets Act (TUTSA), a former employer may sue an ex-employee if the employee has taken trade secrets.  If the employee brings a trade secret to a new employer and the new employer should have known the trade secret was acquired by improper means, the new employer may also be liable under TUTSA.

What is a “trade secret” is disputable.  A trade secret is more than just a special formula, but does not include every piece of information gained during the employment relationship.  Trade secret status may be waived in a number of ways, including by public disclosure.  Due to the complexity of these cases, rather than taking the risk of exposure and a lawsuit, some new employers will simply terminate a recent hire.

The Rodeo: 

Finally, lawsuits brought in the wake of an employee’s departure frequently progress quickly, involving temporary restraining orders (“TRO”).  Within fourteen days, there may be a temporary injunction hearing (a mini bench trial).  If ordered, the temporary injunction will restrain certain behavior until a trial on the merits.  The first few weeks are often intense and frequently involve requests to image personal and work computers and cell phones, searching for potentially confidential or proprietary information.

The landscape is not all bleak.  With good counsel and strategic planning, employees should feel able to seize new employment opportunities, and employers should continue to hire top talent.  All parties should proceed with their eyes open and diligently protect their interests, including getting advice from well-qualified counsel, knowing that proper planning can make a contemplated transition more successful and less stressful.

For additional information on this article please reference: http://bit.ly/29Xr5lF

[This does not constitute legal advice.  Consider consulting an attorney.]