Employment Contracts:  Non-Competition and Non-Disclosure Agreements
Brenda H. Collier

Brenda H. Collier has been a business lawyer and a litigator for over sixteen years and her diverse clientele includes start-up companies, small businesses and Fortune 100 companies. Ms. Collier has extensive courtroom experience and is equally at ease in the boardroom negotiating deals for clients.   Ms. Collier is a 1982 graduate of the University of Texas law school and a University of Tulsa, Oklahoma undergraduate.

Many employment contracts contain covenants not to compete, non-disclosure agreements, or both. Covenants not to compete are the most difficult for the employer to enforce if the provisions are not written properly.

The Texas Courts and the Texas Legislature disagree about the enforceability of non-competition agreements. The Supreme Court of Texas has held that for a non-compete agreement to be enforceable, the employer must have some type of agreement with the employee which gives the employee something of value (most often trade secrets, confidential information or other proprietary information) which the employee promises not to disclose.

A properly written and generally enforceable non-compete agreement will also contain language which:

(1) limits the geographical area to which the agreement applies;

(2) limits the duration of time that the agreement will be in effect; and

(3) details the scope of the activity which is prohibited.

Courts will generally decline to enforce any non-compete agreement which seems to overly restrain someone from earning a reasonable living.

By contrast, a non-disclosure agreement does not restrain a former employee from earning a living, it merely restricts a former employee from competing with the former employer by using secret, confidential or proprietary information which the employee obtained while working for the former employer.

For a non-disclosure agreement to be enforced, the information obtained by the former employee must be truly confidential and not just general knowledge or experience acquired by the employee during the term of employment. To determine if the information obtained by the employee falls under the secret, confidential or proprietary banner, courts may look at the following: whether the access to the information is physically restricted; whether employees who have access to the information are required to sign confidentiality agreements and are educated by the employer as to the need to protect such information; whether outside suppliers, vendors, contractors, distributors, sales reps, etc. who have access to the information are required to sign confidentiality agreements; whether chemical formulations, computer data, and similar information is coded to restrict access or to disguise the identity of the information.

When drafting both types of agreements, it is important not to use overly broad language and to be as specific as possible when detailing the types of conduct which you wish to specifically prohibit.

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