Dallas Non-compete Lawyer : Non-compete Agreements Texas : Non-compete Contract

In a recent case in Houston, a state trial court's denial of an application for a temporary injunction was overturned.  In denying the requested temporary injunction, the court had failed to receive any testimony that might have supported the issuing of an injunction.  The court of appeals held that failing to receive testimnony necessitated reversal of the trial court's ruling, for the following reasons:

First,  the trial court found that the noncompete provision was not "ancillary to an otherwise enforceable agreement."  The court based this finding on the fact that the agreement did not contain an explicit promise by the employer to provide confidential information.  However, the court of appeals noted that, as a result of the Supreme Court's decision in the Mann Frankfort case, a promise to provide confidential information can be implied.  The trial court erred by not receiving testimony on whether the circumstances of the defendant's employment "necessarily involved the provision of confidential information."

Second, the trial court erred in holding that the agreement's restriction on solicitation of customers was overly broad.  The trial court based its ruling on the fact that the restriction applied to all of the employer's customers, and not merely the particular customers with which the defendant dealt.  However, as the court of appeals noted, without hearing any testimony, the trial court could not have known whether the defendant dealt with all of the employer's customers--it is possible that he did so.

The trial court's denial of the application for temporary injunction was reversed and remanded.

 

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In a recent case in a federal district court in Texas, the defendants--individuals who had signed non-compete agreements with their previous employer--contended that their agreements should not be enforceable because they were "constructively discharged" (i.e., forced to resign). 

The federal district court rejected this contention.  In doing so, the court noted that "termination of at-will employment does not invalidate a restrictive covenant and it does not give rise to a claim for constructive discharge."   The court then analyzed the facts proffered by the defendants in support of their constructive discharge claim (e.g., that their former employer had been fined by the Justice Department) and found them wanting.  The court stated that this "in no way indicates that Defendants' work conditions were so altered that a reasonable person would have felt compelled to resign."

OBSERVATION:

Although the district court rejected the defendants' constructive discharge contention in this case, it cannot be said with certainty that such an argument would fail in all cases.  The court might have viewed things differently, for example, if the defendants had quit because they had been asked to participate in criminal activity.  Or, if the employees had been employed for a definite term, rather than at will, the result theoretically might have been different.  That said, this opinion definitely supports the proposition that termination of an at-will employee does not invalidate a restrictive covenant in Texas.

 

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