Texas Noncompete Agreements: Difference Between Buy/Sell Agreements and Employer/Employee Agreements

May 17, 2007 / By Robert Wood

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 business, the seller’s promise not to compete with the buyer increases the value of the business to the buyer.  Without such a covenant the value of the business would be reduced, lessening the likelihood that businesses would be purchased.  In employee covenants, the special training or knowledge acquired by the employee through his employer is valuable consideration and often enhances the value of the employee to other firms.  To allow employees to use or sell this valuable training or knowledge upon leaving a firm would create a disincentive for employers to train or educate employees.

Thus, in buy/sell situations, covenants not to compete are understandably easier to enforce, and their scope can be much broader than employer/employee covenants can be.


www.mylawteam.com

RATE THIS POST

1 Star2 Stars3 Stars4 Stars5 Stars
(No Ratings Yet)
Loading...

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