Employees who leave the company, whether voluntarily or involuntarily, could pose a threat to former employers if they join competitors or form competing businesses. There is always the risk that employees will attempt to divert business away from the company. To combat this problem, some employers have employment agreements containing restrictive covenants.

Non-competition agreements, agreements by former employees not to compete with a former employer for a specified period of time in a specified geographical area, must meet strict requirements to be enforceable in Texas. Since they are so difficult to enforce in courts, employers should consult an attorney before designing such agreements.

To be enforceable, the covenant not to compete must have independent consideration. Moreover, the courts have said mere employment alone is not sufficient consideration for an agreement not to compete. Examples of sufficient consideration might be the promise of guaranteed employment for a specified period of time or a severance package of some sort.  (Note: non-competition agreements connected with the sale of a business, as distinguished from non-competition agreements connected with employment, have a greater chance of being enforced. The courts have held that the sale price is generally sufficient independent consideration to support the agreement.)

Despite Texas' restrictions on non-competition agreements, there are some actions employers can take to better protect themselves from theft of their trade secrets and valuable confidential information. And, even though employees may be free to compete with former employers, they must do so fairly. It is unfair competition to steal, copy, transmit, or otherwise communicate a former employer's trade secret information.

A trade secret is defined as "the whole or any part of any scientific or technical information, design, process, procedure, formula, or improvement that has value and that the owner has taken measures to prevent from becoming available to persons other than those selected by the owner to have access for limited purposes." The hallmarks of a trade secret are that the information or device is not readily available to the public and cannot be duplicated without great expense and time.

Employers should make clear what information is considered confidential or a trade secret. They must also take certain precautions in connection with that information. For example, employers should label restricted information as confidential. In the case of computer data files, password-protecting such files would help show that the employer intended to restrict the availability of the information.

Some companies require employees to sign a confidentiality or non-disclosure agreement. Such documents will identify the kinds of information that is to be treated as a trade secret. These agreements, which are usually easier to enforce than non-competition agreements, may also notify employees of the remedies the employer will pursue in the event there is an unauthorized use of this information.