Texas Noncompete Agreements Enforceable? How Definite Must Promise to Provide Confidential Information Be?

May 16, 2007 / By Robert Wood

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 enforceability.

However, “How strong must the promise be?” is a question that remains somewhat unanswered. Prior to Sheshunoff, several appellate court decisions considered agreements in which (a) the employee “acknowledged” that he would receive confidential information; (b) the employer expressed its “intent” to provide such information; (c) the employer promised to provide information to the employee that the employee “needed” to do the job, and so on.

In those cases, the employee routinely contended that the employer really didn’t promise anything (because the employer could decide not to provide information). Thus, the employee argued, the employer couldn’t rely upon an alleged promise to provide confidential information to justify the employee’s promise not to compete.

Unfortunately, many, if not most, of the pre-Sheshunoff appellate cases that dealt with these issues invalidated the non-compete agreements in question because the alleged employer promises were “illusory”—because they depended upon continued at-will employment.  Before Sheshunoff, a promise dependent upon continued at-will employment was meaningless.  After Sheshunoff, such a promise is enforceable.

Again, though, what is a “promise”?  Must the word “promise” appear in the agreement? Probably not. Terms such as “shall provide” or “agrees to provide” should suffice. But whether a simple “acknowledgement” by the employee that he will receive confidential information is enough is unclear. Some of the pre-Sheshunoff cases opined that terms like these might constituted “implied” promises on the part of the employer to provide information, but a lot of that language was dicta (because the cases were decided on the issue noted above). Now that Sheshunoff has held that the conveying of information need not occur at the moment of signing the agreement, we can expect to get some appellate decisions that squarely define how strong the employer’s promise must be.

 

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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