Ok, I know what you’re thinking. “Don’t you have a vested interest in the answer, Wolfe?”
Yes, clients often pay me for advice about non-competes. It would only be a slight exaggeration to say I’ve paid for my daughter’s college by charging people for advice about non-competes.
So it would be somewhat self-serving for me to say “yes, of course, you should always get advice about a non-compete from an experienced attorney.”
But look, I’m going to give it to you straight. And you might be surprised by my answer. As you’ll see, I’m going to explain why sometimes you may be wasting your money on non-compete advice from a lawyer.
First, let’s define the parameters. There are four common situations where you may need legal advice about a non-compete.
Scenario 1: You Are the Employer
First, let’s say you own a business. You’re thinking it would be a good idea to have new hires sign non-competes. Or maybe you just got burned by an employee who ran off with key customers, so you want to have all your remaining sales force sign non-competes. Or you could be trying to sell the business.
Should you hire a lawyer to draft the non-compete for you, or try to do it yourself?
This one is pretty much a no-brainer.
You see, non-competes are tricky. That’s because there are public policy limits on non-competes. You can’t just draft the non-compete to say whatever you want. So you need a lawyer. (If you really want to nerd out on this you can check out Top 15 Drafting Considerations for Texas Non-Competes or Drafting the Bullet-Proof Texas Non-Compete.)
A slightly harder question is whether you need a lawyer who specializes in non-compete law to help you draft the non-compete.
That’s a harder one. Non-compete law isn’t that complicated (again, a confession against interest). The basic requirement is that the scope of a non-compete must be reasonable. Any competent business lawyer who takes the time to look up the requirements for a non-compete can probably draft a decent one.
Trust me, I see a lot of poorly drafted non-competes in my practice. And many of them were written by lawyers.
I think these lawyers often make the same mistake the clients make. They think the goal is to make the non-compete as airtight as possible. Make it so there’s no way for the employee to get around it.
But this is precisely the wrong instinct when it comes to writing a non-compete. The counter-intuitive truth is that you usually want to make the non-compete as narrow as reasonably possible. That’s because a narrow non-compete is more likely to be an enforceable non-compete.
And ideally, you want the lawyer who drafts the non-compete not only to have experience drafting non-competes but also experience litigating non-competes. Because there’s nothing like litigation to teach you what not to do when drafting.
So, in this first scenario where the client is the company that needs a non-compete drafted for employees to sign, it’s almost always a good idea to hire a lawyer to do it. Preferably a lawyer who has experience litigating non-competes.
But what if you’re the employee, not the employer?
Scenario 2: You Are the New Employee
In the next common situation, the company offered you a job, but they want you to sign a non-compete. If you’re lucky, they propose the non-compete before you accept the job offer. If you’re less fortunate, like most people, you accept the job offer first.
That doesn’t really seem fair, does it? But what’re you gonna do.
Some people will think about calling a lawyer. Is that a good idea?
As a general rule, yes. I’m never going to tell somebody, “look, it’s a total waste of your money to get legal advice about the effect of the agreement you’re being asked to sign.”
But I’m also going to be realistic. In the new-hire situation, spending money on legal advice about a non-compete could end up being a waste of your money.
It really depends on the answer to one question: can you afford to walk away from this job?
There are two types of people who can usually walk away. One is Peter President. Peter is a high-ranking executive who got paid a lot of money at his last job. If he doesn’t like the cut of the non-compete’s jib, he could just enjoy his sailboat for a year and then look for another job.
Or he might do what I sometimes advise high-ranking executives: tell the company “fine, I’ll sign a two-year non-compete, if it’s conditioned on you paying me two years of severance.” If Peter’s going to sit out of the industry for two years, he should be compensated for it accordingly. (But don’t throw this at me if I represent the company in the negotiation.)
Another type who can afford to walk away from a job is Rita Rainmaker. Rita has a big book of business developed over the last 15 years. She brings in seven figures in revenue annually. She’s got some leverage.
But most employees are not Peter President or Rita Rainmaker. Most are like Sally Sales. Sally has about a dozen loyal customers, but the revenue she brings in isn’t going to make or break the company. And Sally can’t go more than a couple months without any income.
So when the company presents Sally with the standard-form Confidentiality, Non-Solicitation, and Non-Competition Agreement its expensive lawyers drafted, it’s probably a take-it-or-leave-it proposition. She’s free to refuse to sign—in theory. But let’s be real. Sally doesn’t have a choice.
Of course, she can hire a lawyer to review the non-compete, tell her what it means, and draft a revised version to propose to the company. And sometimes people hire me to do just that.
But guess what. How often do you think the company accepts my tracked changes?
Hint: it’s about as often as my Dallas Cowboys have won a playoff game over the last 20 years (oh, the truth hurts).
That’s right. Most of the time the company will say “sorry, this is our standard form, approved by our lawyers, we can’t make any changes.”
In that case, my client may not feel great about the money she just spent on my advice about the proposed non-compete. So consider this fair warning.
Scenario 3: There May Be A Lawsuit
People also like to get advice when it looks like there could be a lawsuit over the non-compete. This one applies equally to the employer and the employee.
And yes, of course, if you want to know what’s likely to happen in a non-compete lawsuit, it makes sense to pay a lawyer who has experience with non-compete lawsuits.
But before you spend that money, let me just warn you that the answer may not be very satisfying.
I can walk you throw all the twists and turns of Texas non-compete law, including the law on injunctions, and I’ve got tons of blog posts and YouTube videos on this.
But at the end of the day, my bottom line practical advice is usually going to be the same: it depends on the judge.
What will the trial court judge do if there’s a lawsuit over the non-compete? Will the judge sign a court order prohibiting the employee from working for a competitor? Usually that’s the key question.
The short, final answer is that the judge will do what the judge thinks is fair. And if the losing party appeals, they will probably lose the appeal.
That’s all the non-compete law you really need to know. If you want to pay me for it, that’s great, but that’s probably going to be my bottom line answer.
Scenario 4: They Want You to Sign a Non-Compete on the Way Out
In the fourth scenario, you’re the employee, and you just quit or got fired. The company wants you to sign a severance agreement that includes a non-compete. In that situation, is it a good use of your money to hire a lawyer to review the proposed agreement?
This one really depends. And it depends primarily on how badly you need the severance money the company is offering, if any.
Assuming your employment was at-will, as it usually is, and assuming you don’t already have an agreement requiring the company to pay severance, keep in mind that the company doesn’t have to pay you anything, other than compensation you’ve already earned. That’s the bad news.
The good news is that unless you previously agreed to it, you’ve got no legal obligation to sign a non-compete on your way out.
Now you can see why the key question is how badly you need the money.
If you really need the proposed severance money just to stay afloat, spending money on legal advice may not be the best thing to do.
I can tell you the effect of the non-compete agreement the company is asking you to sign in exchange for the severance, and I can revise it to make it less one-sided, but in many cases the company will say “sorry, take it or leave it.”
Conversely, if you really don’t need the money at all, you may not need any legal advice. You don’t need hire a lawyer to tell you how to say “take your non-compete and shove it.” You can just say nope.
But if you’re somewhere in the middle—it would be nice to have the proposed severance money, and you want to leave on good terms—it probably makes more sense to get some legal advice about the proposed agreement.
And if you have the ability to walk away from the proposed severance money, that may give you enough leverage to get the company to seriously consider your lawyer’s revisions to the non-compete.
And that’s good for people like me. I’ve got another kid going to college in a few years.
Zach Wolfe (email@example.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at Zach Wolfe Law Firm (zachwolfelaw.com). Thomson Reuters named him a Texas “Super Lawyer”® for Business Litigation in 2020, 2021, and 2022.
These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.