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Non-Compete Agreements for Divorcing Business Owners: What You Need to Know

Clayton Bryant | December 21, 2023

Divorce is a legally complex and emotionally charged process, especially when it involves business owners. The fate of the business often becomes a primary concern during the proceedings, which can lead to anxiety and uncertainty over the company’s future. However, negotiating a non-compete agreement with your spouse can help ease concerns and restore confidence in your business interests moving forward.

What Are Non-Compete Agreements?

A non-compete agreement, also known as a non-competition agreement or covenant not to compete, is a legal contract designed to restrict a specific individual from competing in an industry or trade after leaving their current employment or business partnership. For divorcing business owners, a non-compete agreement can be an essential tool in safeguarding a company’s confidential information, client base, and competitive edge.

Can I Negotiate a Non-Compete Agreement with My Spouse to Keep Them from Starting a Competing Business?

Yes, it is possible to negotiate a non-compete agreement with your ex-spouse to ensure that they do not start a competing business using confidential information from your company. However, non-compete agreements cannot prohibit someone from working in an industry for an indefinite amount of time. There are limitations you should be aware of while pursuing a non-compete agreement.

• Enforceability: A non-compete clause must be part of an enforceable agreement. This means that the non-compete clause cannot be enforced if any other provisions in the agreement are against the law.
• Time Limitation: In Texas, non-compete agreements must specify a reasonable time limit, usually one to five years, to avoid being overly restrictive.
• Geographic Limitation: A non-compete agreement cannot restrict someone from working anywhere in the world. The agreement must specify a reasonable geographic limitation and outline how the area limitation is determined.
• Scope Limitation: A non-compete agreement must describe the specific actions it prohibits, such as contacting your company’s customers. The agreement cannot prevent someone from working in certain industries altogether.

How to Negotiate a Non-Compete Agreement with Your Spouse

The goal of negotiating a non-compete agreement with your spouse should be to reach an agreement that protects your business interests while being fair and reasonable. However, it is important to focus on this objective during the highly emotional process of divorce. If you plan on negotiating a non-compete agreement with your spouse to ensure that they do not start a competing business using confidential information from your company, here are the steps you should take:

• Seek Experienced Legal Counsel: It is always a good idea to consult an experienced family law attorney specializing in business-related divorce cases when negotiating a non-compete agreement. They can guide you through the legal complexities of negotiating and drafting a non-compete agreement to ensure that your business is protected.
• Define the Terms: Clearly define the terms and restrictions of the non-compete agreement.
• Consider Offering Compensation: Remain open to offering fair compensation to your spouse in exchange for accepting the non-compete agreement. This compensation can be a lump-sum payment, longer-term financial support, or other assets from the divorce settlement.
• Protection of Confidential Information: Include details in the agreement that explicitly address the protection of confidential information. Outline what qualifies as confidential information and specify the consequences for any breach.
• Review and Revise: Regularly review and update the non-compete agreement as circumstances change. This can help prevent disputes and legal challenges down the road.

Get Help from a Skilled Family Law Attorney

The knowledgeable and accomplished attorneys at Goranson Bain Ausley have a wealth of experience handling divorces for business owners and understand the nuances of complex asset division. Our lawyers provide the legal counsel needed to ensure that your non-compete agreement effectively protects your business interests, helping to secure your future following a divorce. Schedule a consultation with us online to get started, or contact a Goranson Bain Ausley lawyer at our Plano, Dallas, Fort Worth, Granbury, or Austin offices.

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With over 15 years of experience, Clayton Bryant manages the full range of family law cases, including property division, child custody, and trusts and estates. A seasoned litigator, Clayton is experienced with jury trials and is a certified mediator. His clients include professionals and their spouses, parents who want to put the interests of their children first, and mid-life clients looking for the best path forward as they begin new chapters in life. 

For more information about protecting your business in divorce, contact Clayton Bryant at our Granbury office at 877-737-4830.