One concern for business owners when you hire employees or contractors is the risk that your customer list will be stolen. You want to hire qualified and motivated employees, but you do not want to lose customers if those great employees decide to start their own business or offer their services to your clients directly.
You can secure your customer list by having each employee or contractor sign a written agreement. These contracts are usually referred to as Non-Compete Agreements or Non-Disclosure/Confidentiality Agreements. The purpose of these agreements are to keep employees or contractors from disclosing information about your customers. In this agreement, you may explicitly state that customer lists may not be shared or used outside of their job scope.
In addition, it is useful to add language that limits the employee or contractor’s ability to contact, solicit or communicate with customers after termination of their employment. Under Texas law the time limit must be reasonable. The longest a court will typically allow is five years. A more enforceable time limit is two years.
If you choose to have a longer time period, for example, ten years, it is unlikely the courts will enforce that length of time. While the courts will likely not throw the whole case out, they will modify the time down to what they think would be reasonable. For local companies operating in a few parts of the city, a reasonable time is usually no more than two years.
Another key to enforcing your non-compete agreement is by defining the geographic scope. This may be defined by region, city, or metropolitan area. For example, you may choose to define your geographic area as the Dallas-Fort Worth metroplex. Another example would be to define your geographic area as south Texas. As long as the geographic scope is reasonable and you have clients in that area, you should include the information in your agreement in order to support a case in court should the need arise.
In order to avoid trouble with your agreement, do not draft it to say that employees cannot compete with a nationwide geographic area. If the company is not competing nationwide, then that scope is unnecessary. The courts will not allow that.
The bottom line with these types of agreements are that they should be to protect your business. It is absolutely reasonable and smart to do so. However, courts do view these types of agreements as a restraint on trade and commerce because it limits competition.
You can protect yourself for a limited amount of time, but you must understand that at the end of the day, you want people to be able to start working again, even if it ended badly. A two to five year agreement allows you to protect your customer list while still maintaining a fair and professional business environment.
