The Fort Worth Court of Appeals recently issued a very interesting opinion on the geographic scope of noncompete agreements in Texas. In this case, a publishing company did business in Johnson County, Texas. The company hired the defendant to sell advertising for it. The defendant’s job duties were performed in Johnson County. The defendant resigned and began competing in...
Continue ReadingIn a recent case in Houston, a state trial court’s denial of an application for a temporary injunction was overturned. In denying the requested temporary injunction, the court had failed to receive any testimony that might have supported the issuing of an injunction. The court of appeals held that failing to receive testimnony necessitated reversal of the trial court’s ruling, for the following reasons: First, the trial court...
Continue ReadingIn a recent case in a federal district court in Texas, the defendants–individuals who had signed non-compete agreements with their previous employer–contended that their agreements should not be enforceable because they were "constructively discharged" (i.e., forced to resign). The federal district court rejected this contention. In doing so, the court noted that "termination of at-will employment does not invalidate a restrictive covenant...
Continue ReadingWhat happens when an employer gives an employee stock in exchange for a non-compete agreement, but the non-compete agreement is held to be unenforceable. Does the employee still get to keep the stock? This question was raised in a case in which the employer gave a ten percent ownership interest in the company to one of its employees. The...
Continue ReadingAssuming a non-compete agreement in Texas is worded properly and supported by adequate consideration, the next question is whether the restrictions contained in the agreement are reasonable. Texas courts have routinely held that the scope of the restrictions should bear some relationship to the activities that the employee performed for his former employer. For example, if an employee performs...
Continue Reading“Texas is a right to work state–non-compete agreements are unenforceable here.” You’ve heard that 100 times, right? I know I have. And it is dead wrong. The fact that Texas is a “right to work” state means that Texas employees can’t be forced to join a union. It has nothing to do with whether non-compete agreements are enforceable. In...
Continue ReadingA recurring issue in Texas law is whether financial compensation can constitute sufficient consideration for a non-compete agreement. This issue came up recently in a case from the Dallas Court of Appeals. In that case, a company that provided insurance brokerage services granted some stock options to one of its managing directors. The options were conveyed in an Employee...
Continue ReadingTexas courts have long held that an employer’s providing of confidential information can constitute sufficient consideration for a non-compete agreement. But it can be difficult to apply this widely accepted premise, as was demonstrated in a recent case. In the case, an insurance broker signed an employment agreement in which he acknowledged that he would receive confidential information: This...
Continue ReadingA recurring issue in non-compete cases involves how definite the employer’s promise to provide confidential information must be for the agreement to be enforceable. Historically, disputes have focused on whether an explicit promise to provide the information was required, or whether an implied promise (e.g., language in which the employee "acknowledged" that he would receive information) was sufficient. In...
Continue ReadingA recent case from the federal court in Dallas sheds some light on various issues involving the enforceability of non-compete agreements. In Staples, Inc. v. Sandler, No. 3:07-CV-0928-K, 2008 WL 4107656 (N.D. Tex. Aug. 29, 2008), the employee, Sandler, upon joining Staples, Inc., signed a “Proprietary and Confidential Information Agreement” and a separate “Non-Compete and Non-Solicitation Agreement” (“Non-Compete Agreement”)....
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