A recent appellate case from Houston demonstrates that, in determining whether non-solicitation agreements are enforceable, Texas courts treat them as non-compete agreements. In the case, an insurance broker was bound by an employment agreement that contained the following provision: Accordingly, the Executive understands and agrees that for a period of two (2) years following the termination of his employment...
Continue ReadingWhat happens when an employer gives an employee stock in exchange for a non-compete agreement, but the non-compete agreement is held to be unenforceable. Does the employee still get to keep the stock? This question was raised in a case in which the employer gave a ten percent ownership interest in the company to one of its employees. The...
Continue ReadingTexas noncompete agreements routinely contain a provision prohibiting an employee from soliciting, or doing business with, her employer’s customers (except on her employer’s behalf). Not infrequently, these provisions preclude the employee from soliciting any of her employer’s customers. However, some Texas cases have held that such provisions are too broad. Several Texas cases have held that nonsolicitation provisions should...
Continue ReadingAssuming a non-compete agreement in Texas is worded properly and supported by adequate consideration, the next question is whether the restrictions contained in the agreement are reasonable. Texas courts have routinely held that the scope of the restrictions should bear some relationship to the activities that the employee performed for his former employer. For example, if an employee performs...
Continue Reading“Texas is a right to work state–non-compete agreements are unenforceable here.” You’ve heard that 100 times, right? I know I have. And it is dead wrong. The fact that Texas is a “right to work” state means that Texas employees can’t be forced to join a union. It has nothing to do with whether non-compete agreements are enforceable. In...
Continue ReadingA recurring issue in Texas law is whether financial compensation can constitute sufficient consideration for a non-compete agreement. This issue came up recently in a case from the Dallas Court of Appeals. In that case, a company that provided insurance brokerage services granted some stock options to one of its managing directors. The options were conveyed in an Employee...
Continue ReadingTexas courts have long held that an employer’s providing of confidential information can constitute sufficient consideration for a non-compete agreement. But it can be difficult to apply this widely accepted premise, as was demonstrated in a recent case. In the case, an insurance broker signed an employment agreement in which he acknowledged that he would receive confidential information: This...
Continue ReadingIn determining whether a non-compete agreement is enforceable, a Texas court will assess whether the consideration given by the employer justifies the non-compete agreement. Texas courts have held on multiple occasions that an employer’s providing of confidential information is sufficient consideration for a non-compete agreement. Even without an enforceable non-compete agreement, a Texas employer has legal rights and remedies...
Continue ReadingNot infrequently, non-solicitation agreements that employers require their employees to sign are extremely broad. These provisions often preclude the employee from soliciting all of her former employer’s customers. Sometimes, the provisions also preclude the employee from soliciting her former employer’s potential customers. A recent case involved the following non-solicitation provision: Accordingly, the Executive understands and agrees that for a...
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