Non-Compete Agreements & The Gig Economy In Texas

Non-compete agreements have long played a significant role in employment contracts across various industries. These agreements protect businesses’ proprietary information and prevent unfair competition by restricting employees’ ability to work in competing businesses within a certain timeframe and geographic area after leaving their jobs.
Non-compete agreements are not universally enforceable, and their validity depends on several factors. In Texas, as in many states, the enforcement of these agreements must strike a balance between protecting business interests and allowing individuals the freedom to work and earn a living. In navigating the complexities of non-compete agreements within the evolving landscape of the gig economy, businesses in Texas can greatly benefit from the guidance of a knowledgeable business lawyer well-versed in the state’s legal framework and regulations.
The gig economy, characterized by freelance, temporary, and short-term contracts, has introduced complications to the traditional non-compete agreement. Thanks to its major cities like Austin, Dallas, and Houston, which are thriving centers for technology, business, and creative industries, Texas has become a significant hub for gig workers. The state’s regulatory environment and business-friendly policies also contribute to the gig economy’s growth.
Understanding the role and enforceability of non-compete agreements in the gig economy is crucial for employers, workers, and policymakers alike.
Texas Laws & Non-Compete Agreements
Texas law traditionally disfavors contracts that unduly restrict an individual’s ability to work. However, non-compete agreements are enforceable under certain conditions.
The enforceability of non-compete agreements in Texas is outlined in the Texas Business and Commerce Code. A non-compete agreement must be connected to a legitimate business interest, such as protecting trade secrets or other confidential information, to be considered enforceable.
The Texas Supreme Court has established that for non-compete agreements to be enforceable, they must contain reasonable limitations to the following aspects:
- Duration: The time period for which the non-compete applies must be reasonable, ensuring that it only covers the necessary timeframe to protect the business’s interests without unduly hindering the employee’s future employment opportunities.
- Geographical Scope: The geographic area restricted by the non-compete must be limited to the region where the employee worked or had a significant presence or influence on behalf of the employer. This prevents the agreement from imposing unreasonable restrictions on where the employee can find future employment.
- Scope of Activity Restrained: The activities restricted by the non-compete must be specifically related to the employee’s role and the company’s industry. The agreement cannot prohibit employees from working in capacities unrelated to their role within the company or the business’s sector.
Texas courts closely scrutinize non-compete agreements to ensure they meet these criteria. An agreement deemed too broad in duration, geographic scope, or restricted activities may be modified or considered unenforceable by the court.
Non-Compete Agreements in the Gig Economy
The Federal Trade Commission is closely watching how non-compete agreements are used with gig workers. They’re concerned that these agreements might unfairly limit their work opportunities. This is part of a wider move to ensure gig workers, who typically work temporary or freelance jobs, aren’t unfairly restricted by these contracts.
In Texas, gig workers are usually seen as independent contractors. This status matters because it affects whether non-compete agreements can be used against them. Generally, Texas law says non-compete agreements can be enforced if they’re reasonable. But, when it comes to gig workers, things get trickier. The key issues are how much control a company has over a gig worker and whether the non-compete is needed to protect the company’s business.
Because of the unique job nature of gig workers, using non-compete agreements with them in Texas needs careful thought. Companies must balance protecting their interests without unfairly limiting gig workers’ ability to earn a living.
Is Texas Next to Restrict Non-Compete Agreements?
Across the United States, there’s a growing movement against non-compete agreements. Several states have passed laws to limit these agreements, arguing they unfairly restrict workers’ ability to find new jobs. This national trend is a response to concerns that non-compete agreements can hinder job mobility and innovation. As a result, some states now prohibit these agreements for low-wage workers or impose strict limits on their duration and scope.
As more states strive to protect gig workers, this might mean big changes ahead for Texas employers and gig economy workers. While Texas law currently allows for enforceable non-compete agreements under specific conditions, this could all change rapidly. Employers in Texas, especially those in the gig economy, should be mindful of this trend as it could affect how non-compete agreements are viewed and enforced.
Contact Our Texas Business Law Attorneys Today
Need help with non-compete agreements in Texas? If you’re a business looking to draft, review, or enforce non-compete agreements, our Texas business law attorney is here to help. We understand Texas laws and will ensure your agreements protect your business at every step. Whether it’s creating new contracts or dealing with disputes, we offer the advice and legal support you need. Contact us now to keep your business competitive and compliant.
At Roger G. Jain & Associates, P.C., our business attorneys in Houston know how to assist you and your partners with various business law matters. Call (713) 981-0600 or fill out our confidential contact form to learn more about your legal options.

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