In the context of one company purchasing another company, a non-compete agreement is far more enforceable than it would be in an employer/employee situation. That’s hornbook law. A good explanation for this was given in a Texas Supreme Court case: In the case of covenants not to compete incident to the sale of a…
Even after Sheshunoff clarified the law governing non-compete agreements, we continue to see agreements that cause us to scratch our heads and wonder whether they are enforceable. Sheshunoff made clear that, even in an at-will employment situation, a delay between the employee signing the non-compete agreement and receiving the information is not fatal to the agreement’s…
In several states, an employer may–via a non-compete agreement–prevent a departing employee from taking advantage of the relationships the employee developed with the former employer’s customers. This is true whether or not the identities of the former employer’s customers are "confidential." In those states, therefore, the former employer can successfully contend, "We introduced you to…
Company X’s employee (who is bound by a non-compete agreement) resigns and begins working for Company Y (a competitor of Company X). Company X sues its former employee for violating his non-compete. Months later, they reach a settlement, and a final judgment is entered. Company X can then sue Company Y for tortiously interfering with…
Another quick hit on the ramifications of Sheshenoff. In recent years, employers have not infrequently added to their non-compete agreements a promise to convey confidential information to the employee, even if the employee no longer worked for the employer when the information was conveyed. The purpose of this was to address the employee’s argument that,…
In a recent case, the employer’s consideration in exchange for the employee’s promise not to compete was set forth in the following provision: Employer hereby agrees to provide to Employee any specialized training necessary, in the opinion of Employer, to allow Employee to conduct the duties of employment with Employer. Employer further agrees to…
One of the most frequently-litigated issues involving noncompete agreements is whether the consideration given by the employer was adequate. There are generally two parts to the inquiry: one, whether the consideration given was real (i.e., not “illusory”); and two, whether the consideration given justified the noncompete agreement in question. Giving a definite term of employment…