If you run a small business you look to control expenses wherever you can. And if you are going to ask your employees to sign a non-compete agreement, you are probably tempted to use a templated noncompete agreement rather than paying an attorney to draft one for you.
Here are our two cents: It’s going to be much more costly for you to have an unenforceable non-compete agreement than to pay a qualified attorney a one-off fee for one that you can actually enforce.
What Is a Non-Compete Agreement and Why Is It Used?
A non-compete agreement is a contract between two parties that prohibits one of the parties from competing with the other. Generally, between an employer and employee, these agreements restrict the employee from engaging in any business activity that conflicts with the employer’s business interests. If non-compete clauses are not in place, the company may risk its proprietary information and lose its client base. These agreements are shields for the employers and impact their employees while working and post-employment.
What Is a Non-Compete Agreement Template?
A non-compete template is a preformatted document with non-compete contractual language. It is a shortcut, fill-in-the-blank agreement. However, as with many shortcuts, crucial elements of valid and effective non-compete agreements can be missed when templates are used.
Given the nature, importance, and legal technicality of non-competes, you should avoid using a template. Instead, an attorney can create a thorough, enforceable non-compete agreement specific to your needs. Let’s look at some of the particular reasons you should not use a template for your Texas non-compete agreement.
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What Are the Pitfalls of “Free” Texas Noncompete Templates?
Non Compete Templates May Not Take into Account Up-To-Date Local Laws
While templates often advertise that they are state-specific, that does not guarantee that the template will be enforceable in Texas. To be binding, non-compete agreements in Texas must follow current legislation, case law, and contract standards. As a noncompete template may not take all of these into consideration, it may not be your best option.
Texas has court history regarding how judges have interpreted various non-competes and how they view their enforceability. Local attorneys who practice contract law are aware of how Texas courts analyze these agreements. A template may not take this into account. Also, state laws vary, and they are updated at different times. Texas may have recent court decisions regarding non-competes that are not addressed by a template.
A Template May Not Address Every Required Aspect of a Non-Compete
Non-compete agreements fall under a specialized area of contract law. There are elements these contracts must have, such as offer, acceptance, adequate consideration, capacity, and other legal specifications. If these legalities are not included and accurate, the contract is not valid. A template may not guarantee the legally correct inclusion of these elements. Nor is it able to evaluate whether those signing the contract have the right and legal capacity to do so.
Also, if an employee challenges the agreement, a court will examine whether the scope of the non-compete is reasonable. In other words, the court will decide if the degree to which a company limits an employee via the non-compete is greater than necessary to protect the business’s legitimate interests. Attorneys will help you appropriately narrow the scope of the agreement to specific industries and regions in Texas.
A template may not take your individual circumstances into account. Without accurate consideration of scope and other legalities at the formation of the agreement, the contract may be unenforceable.
Non Compete Agreement Templates Are Not Created for a Specific Business or Individual
Templates are not individualized and do not address a company’s specific needs. There are crucial clauses necessary in some non-competes that will not be relevant for others. Examples of company-specific content in a non-compete, possibly not addressed by templates, include:
- A company doing business in more than one state or internationally will need to address in which court(s) legal action will be taken if the contract is violated;
- How a company’s change in ownership will impact the non compete;
- For businesses in healthcare, buyout clauses for their physicians is a necessary clause;
- If a company has trade secrets, this will require special attention in the agreement; and
- The extent to which a company can prohibit the work of former employees, and whether those employees solicit business from former clients, is a clause that must be individualized based on the type of business.
Your company will have its own special needs in a non-compete agreement. An experienced attorney will be sure to include all necessary content.
Noncompete Templates May Not Actually Save You Money
Using a free or low-cost template may be tempting as a cost-saving measure. However, in the long run, the use of a template may cost a company substantial money and time and harm the business.
Hiring an attorney as the first step means that the non-compete will be created correctly from the outset. If the agreement later needs to be changed or updated, the company can re-engage the attorney to address those needs. There will be an attorney-client relationship already in place. This relationship will also prove valuable for companies needing legal advice dealing with other issues, such as what to do if an employee will not sign a non-compete.
If a contract is invalid it may be challenged in court, which can lead to expensive court costs and attorney fees. If your non-compete is deemed unenforceable, a former employee may hurt your interests by poaching your clients or taking the expertise they gained from your training to a competitor. And if you try to enforce an agreement that is later declared invalid, your employee may even be able to get damages from you by claiming you wrongfully interfered with their employment prospects.
For something as crucial as a non-compete, a smart company will engage experienced attorneys.
Non Compete Templates May be Especially Risky for Small Businesses
Even if you are a small company, consider consulting a lawyer. A lawyer can assess the need for a non-compete and explain how it will protect your business. The use of a template for a small business carries the same risks as for a large company. If you are a sole proprietor, an attorney is best suited to help you analyze the need for a non-compete if you choose to hire employees.
How Can a Qualified Texas Non Compete Attorney Help?
The attorneys at Wood Edwards LLP in Dallas, Texas, have represented both employees bound by non-competes and the companies trying to enforce the non-competes. Whether you are at the initial stages of considering the need for a non-compete, a business ready to implement a non-compete, or a company whose employee has violated a non-compete, Wood Edwards can help you.
We are strong litigators and excellent arbitrators who have decades of experience regarding non-compete agreements in Texas. Wood Edwards offers efficiency, flexibility, and extraordinary personal service. Our attorneys are ready to take the action necessary to protect the best interests of your business. Contact us now.
- What’s the Status of Non-Compete Agreements in Texas in 2023? (1/25/2023)
- Are Texas noncompete agreements enforceable if the employee is terminated? (3/9/2022)
- Do Texas noncompete agreements apply to independent contractors? (3/7/2022)
- Calculating a Noncompete’s Geographic Scope: By Driving Distance, Or “As The Crow Flies”? (3/1/2022)
- Do I need to have my employees sign non compete agreements? (10/6/2017)
- Can A Noncompete Be Extended If It Is Violated? (2/3/2017)
- Who Can Get Attorneys’ Fees in a Non-Compete Action? (1/25/2017)
- Geographic Limitations on Texas Non Competes? (10/17/2016)
- Possible Tort Claim Not Sufficient Consideration for Noncompete in Texas (3/2/2016)
- Money for a Noncompete in Texas? (2/26/2016)