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Texas Restaurant Law

Restaurant Non-Competes: Are They Worth It?

Posted in Contracts, Employees & Waitstaff, Employment, Liability, Litigation, Recent Law Trends

A funny thing happened recently. When Lauren Drewes Daniels at The Dallas Observer featured TexasRestaurantLaw.com last week at this link, a controversy ensued between folks that commented on the article. The dispute involved whether non-competes were valid and enforceable in Texas. Apparently, it is a common myth that non-compete agreements are not enforceable in Texas, and it is just that: a myth.

Non-Compete Agreements Are Enforceable In Texas

Despite the myth, non-compete agreements are enforceable in Texas. There are certain requirements that must be met, including independent consideration and a limitation on the geography, the time-period, and the scope of these agreements. Some situations make them easier to enforce, like the sale of a business, but as long as the requirements are met, Texas courts can and will enforce non-compete agreements.

Why Do People Think Otherwise?

The myth that non-compete agreements are unenforceable comes from a few sources. For instance, they have been historically difficult to enforce because people fail to hire professionals who know the requirements when they draft these agreements. The law on non-compete agreements (like any law) changes often, and it is important to avoid using on-line forms that are not specifically designed for Texas. Also, there is a line of case law that says that non-compete agreements are “disfavored” in the law. This does not make the agreements unenforceable; instead, it just means that they must be carefully written to comply with Texas law.

Are Non-Compete Agreements Worth The Trouble?

Every business, especially restaurants, should consider using non-compete agreements. So long as they are carefully prepared, they can be enforceable. Restaurants can use them to protect, among other things, recipes, business plans, and any other typical trade-secrets that are used or developed by the restaurant.

Take-Aways

In light of the above, please remember the following:

1. Non-compete agreements are enforceable.
2. Restaurants should use them to protect recipes, business plans, and any other typical trade-secrets that are used or developed by the restaurant.
3. Non-compete agreements must be carefully prepared to comply with the strict requirements under Texas law.

Do you use non-compete agreements? Have you ever signed one? What difficulties have you experienced in this area? Please share your thoughts!

About the author: Matthew Sanderson is a restaurant lawyer in Texas. “Good service with a smile” is his motto. Click here to find out more about Matthew Sanderson’s legal practice and how he can help you today. Follow him on Twitter @dealattorney.