Possible Tort Claim Not Sufficient Consideration for Noncompete in Texas

March 2, 2016 / By Robert Wood

In recent years, Texas courts have shown support for the employer’s use of non-compete agreements. The courts have done so by finding certain requirements of enforceability implied in non-compete agreements in some circumstances. Despite this trend, in June 2015, the federal appellate court that covers Texas ruled that a duty to keep information confidential cannot be assumed into a contract merely because there may be a common law or statutory duty to keep information confidential. This ruling provides a limit to the courts tendency to find enforceability requirements implied within non-compete agreements.

In order for a non-compete agreement to be enforceable, the law requires that it be ancillary to or part of an otherwise enforceable agreement. In the employment context, the Texas courts have found that the otherwise enforceable agreement requirement may be met if the employer promises to provide confidential information and the employee promises to keep that information confidential. The court may find that an employer’s promise to disclose confidential information is implied if confidential information must be disclosed in order for the employee to perform his job. While a court may imply into a contract either the employee’s or the employer’s promises, a court will not imply in the same contract both the employer’s promise to provide confidential information and the employee’s promise to keep information confidential.

The federal appellate court over Texas recently reviewed a case in which the agreement did not contain any promises by either the employer or the employee relating to confidential information. In an attempt to have the court imply these promises into the contract, the employer argued that a promise by the employee was not needed because “a promise not to disclose confidential information would have been redundant and unnecessary because, as a matter of state law, . . . [the employee] had that obligation without a written contract or express promise.”

The employer was trying to insert a duty that is found in tort actions (the duty of an employee after termination not to use or to disclose to third persons trade secrets or other confidential information) into the contract. The court categorically dismissed this argument stating that a non-compete agreement is a question of contract, not tort. A duty found in tort does not automatically become a contractual duty and thus make an otherwise unenforceable agreement enforceable.

While an employee has a duty not to disclose trade secrets or other confidential information to third parties, this tort action should only be used as a supplement and not a replacement for a quality-drafted non-compete agreement. At Lindquist Wood Edwards LLP, our lawyers use the most up-to-date law to not only draft non-compete agreements to protect your company’s confidential information, but also to litigate your non-compete and provide the strongest arguments for its enforceability.

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About the Author

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