Are noncompete agreements in Texas enforceable if the employee is terminated?
I’m periodically contacted by an employee who says to me: My employer fired me. That means my noncompete goes away, right?
Not exactly.
There is no rule in Texas stating that if an employee is terminated, rather than quits, a noncompete agreement that he signed goes away. The reason for this is simple: the consideration for the noncompete isn’t mere employment.
If a noncompete is enforceable, it’s not so because the employer hired the employee. Rather, it’s enforceable for other reasons, such as the employer sharing trade secrets with the employee. Thus, the fact that the employer fires the employee doesn’t mean the agreement goes away.
That said, the fact that the employee was fired may carry some weight in court. An employer who fires an employee may have a tough time subsequently contending, “This guy is so important, and he knows so much about my business, that he must be prevented from competing.”
So, technically speaking, the fact that the employee was fired doesn’t mean that the employer can’t enforce the noncompete. Practically speaking, though, it may complicate an employer’s attempt to do so.
Of course, as with many things in this area of law, there is no bright-line rule. Each situation must be judged on its own unique set of facts.
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Robert Wood has been a Texas trial lawyer since 1993. During that time, he has represented small, mid-sized, and Fortune 100 companies in business and employment litigation matters all over Texas and the United States. He has also advised and represented hundreds of individuals in employment litigation matters. Read more about Robert Wood