Injunctive Relief in Texas Non-Compete Cases
An employer may be entitled to injunctive relief to enforce a non-compete agreement in Texas.
To obtain permanent injunctive relief, it’s not necessary to prove that, without an injunction, the promisee will suffer irreparable harm. But that is not the case with respect to temporary injunctive relief.
Most courts require proof of irreparable harm to obtain a temporary injunction for a non-compete violation. Irreparable harm means harm that cannot be adequately compensated by monetary damages.
Proving Irreparable Harm for Temporary Injunctions
Irreparable harm may exist if damages are hard to quantify or cannot be compensated.
Threatened disclosure of trade secrets to a competitor can constitute irreparable harm, especially if it’d give the competitor an advantage.
Moreover, proof of a continued breach of a non-compete agreement by a highly-trained employee may constitute irreparable harm. In determining whether to grant temporary injunctive relief, the court must balance probable harm to the employer if the injunction is not issued with probable harm to the employee if it is.
Damages for Breach of a Non-Compete Agreement
In addition to injunctive relief, a court may award damages resulting from breach of a non-compete covenant. Awardable damages might include lost profits resulting from the departing employee’s breach of the noncompetition agreement. A non-compete agreement can contain a liquidated damages provision, but the provision must constitute a reasonable forecast of just compensation for the harm caused by the breach.
Reformation of Overly Broad Non-Compete Agreements
If the court holds that the scope of the non-compete agreement is too broad (e.g., if the court holds that the geographic scope should be limited to Dallas/Fort Worth rather than to all of Texas), it will reform the scope to make it reasonable. However, if reformation of the scope is required, damages may only be awarded for “post-reformation” violations.
For this and other reasons, an employer is incentivized to ensure that the scope of a non-compete agreement is reasonable.
When Employees Can Recover Attorney’s Fees
Attorney’s fees and costs may be awarded to the promisor (employee) if he proves that the:
- Scope of the covenant is unreasonable,
- Employer knew at the time the agreement was signed that it was unreasonable, and
- Employer has attempted to enforce the covenant to a greater extent than necessary to protect its goodwill or other business interests.
Texas courts also hold that an employee who seeks a declaration that a noncompete is unenforceable may recover attorney’s fees. This is allowed under the Texas Declaratory Judgment Act.
Can Employers Recover Attorney’s Fees?
There is no provision in the non-compete statute for an employer who successfully prosecutes an action against an employee to recover attorney’s fees. At least one Texas court of appeals has held that the non-compete statute’s silence on this issue precludes an employer from recovering its fees under the statute (or any other applicable law). However, another Texas court has permitted an employer to recover its fees under the Texas statute allowing the prevailing party in a contract dispute to recoup its attorney’s fees.
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