Geographic Limitations on Texas Non Competes?
Worldwide Geographic Restriction of Texas Noncompete Agreements May Be Enforceable
Last revised: 10.17.16
In the past, Texas courts have not fully embraced the ability of a non-compete agreement to restrict an employee from working anywhere in the world. In several cases, Texas courts have held that the proper geographic scope of a noncompete agreement is the territory in which the employee worked.
Recently, though, a federal district court in Texas was sympathetic to a noncompete agreement with a worldwide geographic scope.
Under Texas law, a covenant not to compete is enforceable only if it contains reasonable limitations as to duration, geographic area, and scope of activity. A non-compete agreement may not restrict the employee more than is necessary to protect the goodwill or other business interest of the employer.
Case Example Involving Questions of Geographic Limitations:
In a recent Texas federal case, the employer conducted business within the narrow field of reactor thermometry. The field has a small customer base and a limited number of licensors. The employee worked in the sales department. Within two years, the employee was promoted to Regional Sales Manager for sales territories that included all of Europe, Russia, and parts of the United States and Canada.
The employee also had access to his employer’s confidential worldwide client and sales information. The employee also attended global conferences for his employer where he developed contacts with customers, prospective customers, and licensors who operate on a global scale. Further, the employee’s sales efforts reached beyond his sales territories to countries all over the world.
The non-compete at issue restricted the employee from performing work or accepting employment with any competitor within the United States and any country in which the employer did business. The court found that because of the employee’s geographical reach in his job, his exposure to employer’s global confidential information, and the fact that he worked within a narrow field, the non-compete agreement was reasonable and did not restrict the employee more than necessary to protect the employer’s legitimate interests.
Businesses are starting to operate on a more global scale. Ease of travel and the internet are enabling even the smallest companies to reach a worldwide clientele. With the courts beginning to accept a worldwide restriction as reasonable, the need for an experienced attorney is great.
Our attorneys have years of experience drafting and litigating non-compete agreements. We can advise you on whether a worldwide restriction is the right thing for your company and draft an agreement that will give your business the greatest protection while minimizing the risk of it containing an unreasonable restriction.