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In our free market economy, it’s a given that competition is a good thing, right? Theoretically, yes, but courts have made it clear that competition, to be lawful, must also be “fair.” A Texas case shed some light on the difference between fair and unlawful competition. Renew Data Corporation ("Renew") provided computer forensic services for corporations. Renew would search...
Continue ReadingIn situations in which an employee leaves one company and goes to work for another, a tortious interference claim may be asserted against the departing employee or the new employer. Tortious interference claims come in two types: tortious interference with (an existing) contract, and tortious interference with prospective business relations. A tortious interference with contract claim has the following...
Continue ReadingA provision prohibiting an employee from soliciting his former employer’s remaining employees must meet the requirements applicable to noncompete agreements. Trying to attract workers constitutes fair competition (unless it is unfair, as it might be if an employee raiding provision prohibits it, or if doing so constitutes tortious interference).
Continue ReadingPractical considerations in this area of the law include the following: For the Former Employer : 1. In addition to (or in lieu of) a non-compete provision, an employment agreement may contain non-solicitation or employee raiding provisions. A non-solicitation provision typically prohibits a departing employee from soliciting his former employer’s customers. The "old" employer should be cognizant of...
Continue ReadingAn employer may be entitled to injunctive relief to enforce a non-compete agreement in Texas. To obtain permanent injunctive relief, it is not necessary to prove that, without an injunction, the promisee will suffer irreparable harm. But that is not the case with respect to temporary injunctive relief. Most courts hold that to obtain temporary injunctive relief to enjoin...
Continue ReadingA non-compete agreement in Texas must not impose upon the employee greater restraints than are necessary to protect the business and goodwill of the employer. Moreover, the scope must bear some relationship to the activities of the employee. It is generally permissible to keep an employee from soliciting business from customers with whom he dealt during his employment, and...
Continue ReadingOnce an otherwise enforceable agreement has been found to exist, the next question is whether the non-compete provision is "ancillary" to that otherwise enforceable agreement. Texas courts have made it clear that the following must be true for a covenant not to compete to be ancillary to an otherwise enforceable agreement: •The consideration given by the employer [in...
Continue ReadingNon-competition covenants are typically contained in written (employment) agreements that contain many other provisions. The first step in determining whether an enforceable non-compete agreement exists is to mentally draw a line through the non-compete provision and examine the remaining provisions. The pertinent question with respect to the remaining provisions is: Have both the employer and the employee made binding...
Continue ReadingTexas non-compete agreements often contain various other provisions, including the following: Choice of Law. Non-compete agreements typically will specify which state’s law will decide whether, and the extent to which, a non-compete agreement is enforceable. Even in cases in which the parties have agreed that the law of a state other than Texas will apply, the court will...
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