Permissible Scope of Nonsolicitation Agreements in Texas

April 16, 2010 / By Robert Wood

Not infrequently, non-solicitation agreements that employers require their employees to sign are extremely broad. These provisions often preclude the employee from soliciting all of her former employer’s customers. Sometimes, the provisions also preclude the employee from soliciting her former employer’s potential customers.

A recent case involved the following non-solicitation provision:

Accordingly, the Executive understands and agrees that for a period of two (2) years following the termination of his employment for any reason whatsoever, he will not, directly or indirectly, solicit, place, market, accept, aid, counsel or consult in the renewal, discontinuance or replacement of any insurance (including self-insurance) by, or handle self-insurance programs, insurance claims, risk management services or other insurance administrative or service functions for, any AJG or Corporation account for which he performed any of the foregoing functions during the two-year period immediately preceding such termination. (emphasis supplied)

Unlike a “blanket” non-solicitation provision applying to all of the employer’s customers, this one only prohibited the former employee (an insurance broker) from soliciting and doing business with customers for whom he personally worked during his final two years with his employer. The provision was narrowly tailored to the customers to whom the employer could point and say, “You would have an unfair competitive advantage if you were allowed to work with that customer. Thus, you shouldn’t be allowed to do so.”

The court enforced this provision against the former employee. In doing so, the court noted that many Texas courts have enforced non-solicitation provisions to prevent former employees from taking advantage of their relationships with the particular clients with whom they dealt while working for their former employer. The court explained: “A number of courts have held that a non-compete covenant that is limited to the employee’s clients is a reasonable alternative to a geographical limit.”

Obviously, it would be too simplistic to say that a non-solicitation provision narrowly tailored to the customers serviced by the employee in question is automatically enforceable. Each case must be judged on its own facts, taking into account factors such as the consideration given by the employer in exchange for the promise not to solicit. But some Texas courts have enforced such narrowly-tailored provisions.

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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