Over the past decade, Attorney Robert Wood has published hundreds of articles on the Texas Contract & Noncompete Disputes Blog, establishing himself as an authority on Texas noncompete law. If you want to gain a better understanding of how non-compete and other contractual issues are handled in the Texas courts, you’re in the right place.
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It’s long been the law in Texas that an employee can, while still employed, prepare to compete with his employer, as long as he doesn’t actually do so. If he does compete with his employer, he can be found liable for breach of fiduciary duty. In a recent case decided by the federal Fifth Circuit Court of Appeals, the court explained...
Continue ReadingIn a recent Texas case involving a restrictive covenant, the plaintiff contended that the duration of the non-compete covenant should be judicially extended beyond the agreement’s normal expiration date. In that case, the seller of a dance studio entered into an agreement in which she promised not to compete with the buyer. As is true in most states, non-compete covenants contained...
Continue ReadingWhat happens if an employer seeking to enforce a non-compete agreement is itself in breach of the agreement. Does the employer’s previous breach adversely affect its ability to enforce the non-compete? Maybe. It’s "hornbook" law in Texas that one party to a contract is precluded from enforcing a contract if that party itself is in “material” breach. In DeSantis v....
Continue ReadingNot infrequently, whenever an employer hires a competitor’s ex-employee, the competitor sues not only its ex-employee (for an alleged non-compete violation, breach of fiduciary duty, misappropriation of trade secrets, tortious interference, etc.), but also the new employer. The plaintiff contends, for example, that just as its ex-employee is liable for using and disclosing its trade secrets, the new employer...
Continue ReadingEmployees signing employment agreements in Texas should be mindful of the following potential terms: 1. Term of Employment. Employment agreements are typically either for a fixed term or are at-will. An at-will agreement, obviously, can be terminated by either party at any time for any reason. Some agreements contain “Evergreen” provisions, which state that the term of the agreement shall be...
Continue ReadingTexas courts routinely hold that at-will employment is "illusory" consideration. Because the employer is free to terminate the employee at any time, the courts reason, giving an at-will job to someone is, legally speaking, meaningless. Thus, non-compete agreements in Texas based upon that consideration are unenforceable. Not all states agree. While researching a noncompete matter in Illinois the other...
Continue ReadingIn July 2001, Sysco, a distributor of food service products, issued a Request for Proposal (“RFP”). Among the companies that received the RFP were Mark III and BI. Mark III and BI had a business relationship that involved them sharing information and customers. Unbeknownst to Sysco, their relationship was formalized in a written contract. Mark III and BI submitted a...
Continue ReadingTexas courts have long held that Texas law should determine whether non-compete agreements affecting Texas residents are enforceable. As a result, Texas courts generally will not enforce out-of-state choice of law provisions. However, as a recent Texas Supreme Court case illustrates, contractual forum selection provisions can alter that result. In Re AutoNation, Inc. involved a suit filed in Broward...
Continue ReadingNon-compete agreements routinely provide for the employer to get injunctive relief in the event the employee engages in post-employment competition. In a recent case, the agreement in question subjected the employee to potentially harsher penalties. The non-compete in question contained the following provisions: 14. Restrictive Covenant. In consideration of the benefits being provided to the Employee pursuant to this Agreement as...
Continue ReadingIn a recent case in Houston, the First District Court of Appeals upheld a trial court’s failure to reform an overly broad covenant not to compete. The covenant was overly broad in three respects: (a) there was no geographical limitation; (b) the covenant prohibited the employee from contacting all of his former employer’s customers, not merely the customers with whom the...
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