Big company changes like mergers, acquisitions or new leadership can put your business at risk. During these times, it is easier to lose your trade secrets and other competitive advantages.
For Texas employers, it is important to enforce noncompete agreements and protect proprietary information while these changes are happening. Following state business law can help you protect your company’s value.
The exception to Texas competition law
The Texas Free Enterprise and Antitrust Act (TFEAA) generally bans contracts that limit business competition. However, the Texas Covenants Not to Compete Act can be an exception to this law because it provides the framework for enforceable restrictive covenants. For it to work, a noncompete contract must be tied to another valid agreement, like an employment contract involving the exchange of trade secrets.
Key clauses for enforceable restrictive contracts
For a noncompete to be valid in Texas, it must have a reasonable scope to protect the employer’s legitimate business interests. Texas courts generally look at the following factors when checking a contract:
- Duration of agreement
- Limits of geographical area
- Scope of prohibited activity
If the current terms goes too far in any of these areas, a Texas court may refuse to enforce it or may narrow it to make it reasonable. Employers may also need to give employees something of value when they sign, like job training or access to confidential information.
Trade secret protection in Texas
Trade secrets are private and valuable business details, like customer lists, pricing formulas and internal plans. During a corporate transition, the risk of misappropriation of a company’s trade secrets becomes higher. Fortunately, The Texas Uniform Trade Secrets Act (TUTSA) helps protect businesses when someone uses or shares confidential information without permission, even if a non-compete is difficult to enforce.
Litigation strategies for employers
If you suspect a former employee is breaking a noncompete contract or using trade secrets, taking swift action before filing a lawsuit is often vital. Sending a cease and desist letter is often the first step. It demands that the behavior stop and warns the former employee of the issue.
In urgent cases, you may seek temporary restraining orders (TROs) or pursue a temporary injunction to stop the misuse of confidential information while the case moves forward. A forensic investigation may also help prove data theft or improper solicitation.
Safeguarding your company’s future
During a corporate transition, it is important to have a well-draft agreement to help protect your company’s business interests. An attorney can help you put the right protections in place for trade secrets and other sensitive data to secure your company for the long term.