Strictly speaking under Texas law it is hard to make a non-compete stick when it is first introduced at the end of employment.  Assume a situation where an employee signed a confidentiality agreement and non-disclosure agreement but didn’t sign a non-compete, non-solicit (customers), or anti-raid (employees).  Is the employer out of luck?  Maybe not.

For purposes of this discussion, assume that what I am about to suggest is not legally enforceable under the Texas non-compete statute.  Put another way, the employer is never going to sue the agreement and the employee is under no requirement to sign the agreement. They can simply walk – a non-compete based on past consideration doesn’t work.

So what about this – the employer tells the soon to be former employee they will make quarterly (choose the interval) payments of some amount as long as employee doesn’t compete, solicit and/or raid?  The payments can be structured whatever works best and will lead to compliance.  Maybe there is a “balloon” payment at the end to incentivize compliance.  The reality is if the ex-employee decides one day they want to compete/solicit and/or raid they can.  The ex-employer is not going to sue because it is almost a certainty that the agreement is unenforceable.  But if the employer gets the benefit of post-employment covenants for three or six months it might be worth it.  There is no one size fits all.

One wrinkle – there is the possibility that an ex-employee might sue to declare the agreement non-enforceable.  That seems highly unlikely.  First, employees suing employers over non-competes is rare.  Second, any somewhat savvy employee and lawyer will probably realize that the agreement is unenforceable and by giving up their right to payments, they can compete.  In fact, the agreement might be tailored in a way to address such a scenario.  Regardless, make sure to contact your local neighborhood employment lawyer if considering such an agreement.

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Photo of Rob Radcliff Rob Radcliff

Rob represents businesses and individuals in disputes in Texas and throughout the United States. He focuses his practice on employment and commercial matters including issues arising from the arrival and departure of employees.