Scope of Noncompete Agreements
The Fort Worth Court of Appeals recently issued a very interesting opinion on the geographic scope of noncompete agreements in Texas. In this case, a publishing company did business in Johnson County, Texas. The company hired the defendant to sell advertising for it. The defendant’s job duties were performed in Johnson County.
The defendant resigned and began competing in nearby Parker County. The company sued him for violating his noncompete agreement. The company contended, “We were planning on expanding into Parker County, and you knew that. Thus, you should not be allowed to compete with us there.”
The Fort Worth Court of Appeals rejected the company’s argument. In doing so, the court noted Texas’ long-standing rule that the proper scope of a noncompete agreement is the territory in which the employee worked. The court noted, “The parties have not cited, and we have not found, a case in which a geographical limitation including areas where an employer does not currently operated but has targeted for futur expansion, standing alone, is reasonable.”
The court of appeals reversed the trial court’s ruling in favor of the company.
When analyzing the proper scope of a noncompete agreement, Texas courts usually focus primarily upon the activites of the person bound by the covenant. In this case, the company tried to expand the scope of the covenant to counties in which it planned to do business. But the court of appeals held that this went too far.