Smooth Transitions : Rob Radcliff : Texas Non-Compete Lawyer & Attorney : Langley Weinstein LLP Law Firm : Dallas Employment & Employee Departures : Smooth Transitions Law Blog

#2: Non-Compete Agreements Are Unenforceable in Texas.

Texas courts have been enforcing non-compete agreements for many years and they are specifically authorized by Texas law - Texas Business and Commerce Code Section 15.50.  The highlights from that statute:

a covenant not to compete is enforceable if it is ancillary to or part of an
otherwise enforceable agreement at the time the agreement is made
to the extent that it contains limitations as to time, geographical
area, and scope of activity to be restrained that are reasonable and
do not impose a greater restraint than is necessary to protect the
goodwill or other business interest of the promisee
 

The Texas Supreme Court has made non-compete agreements easier to enforce over the years and that trend is likely to continue.  If proper, employers should be using non-competes as a legitimate business tool to protect themselves from unfair competition.  

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Although it's nice to have high paid jury consultants and days to ponder potential jurors, the reality is in most jury trials the lawyer is handed a list of potential jurors minutes before they walk in the Courtroom door.  It's then up to the lawyer and his client to sift through basic information about the individual (race, religion, profession etc.) and then ask twenty minutes worth of questions to hopefully learn more.  Jury selection is more of an elimination process than a selection process.

With the rise of social networking sites, blogs, and the like, more an more people have some sort of an internet presence.  Trial lawyers, from prosecutors to defense lawyers, are using that information during the jury selection process.  As illustrated in a recent Wall Street Journal article, lawyers are using the net through ipads and laptops to try an obtain information about prospective jurors as they sit in the courtroom.  An example:

Paul Kiesel, a plaintiffs' lawyer in Beverly Hills, Calif., said his firm ran searches of social-networking sites during the jury-selection process in a recent sex-abuse case involving a Catholic priest. The case was settled, but Mr. Kiesel said the information would have proved invaluable.

"We could glean whether someone was identified with a religion, and get a sense of how devout they seemed to be," he said. "It's a waterfall of information, compared to the pinhole view you used to get."

Jury selection is but one example of lawyers using Internet research.  Assume that the same information is being obtained for potential witnesses and parties at the outset of a lawsuit.  The point is that social networking information is fair game in Court and it provides a candid look in many instances of the thoughts and predispositions of people. 

This type of research will continue and become more extensive as  individuals develop more and more of an on line history.  Don't be surprised if within the next few years there are actually services that will provide this type information for a fee - there are already some that do so in the employment background search world.

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#1: Employers can't enforce non-competes when they terminated the employee.

Wrong - Assuming the non-compete satisfies Texas law, it can survive termination or resignation.  Most agreements will spell this out in the agreement, some do not.  (Now of course this also assumes the firing was legal, i.e., not based on race, national origin, gender, etc.) 

This makes sense in most cases.  What if there is an employee who purposely gets fired so they can go out and compete - it happens.  Should the employer be penalized because they fired the employee - no.  Now, what about  a situation where the employer merely fires the employee to gain some tactical advantage in the marketplace and then enforces the non-compete?  A judge asked to enforce a non-compete on facts like that may have a different view on enforcing the non-compete in the context of a temporary restraining order and injunction.

The balance of non-compete cases are resolved early on, either through a TRO or injunction.  TROs and injunctions force the parties to: (1) spend significant fees early on in the process; (2) get in front of the judge; and (3) negotiate.  Parties looking to defend or enforce a non-compete should be considering what the optics will look like to the Court in the context of injunctive relief - usually a situation where the employer is attempting to keep the employee from working for a new employer. 

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Texas Tech won  its appeal against Mike Leach and his claims for millions of dollars in compensation are gone.  The Seventh Court of Appeals, based in Amarillo,  recently took up Texas Tech's claim of sovereign immunity and reversed the  trial court, finding in Tech's favor. 

The Court ruled in its opinion that Leach cannot maintain a breach of contract claim against the university under the doctrine of sovereign immunity.  This means Leach will be unable to pursue claims for the millions of dollars he claimed he was entitled to under the terms of his contract.  There are some remaining issues that the trial court will address, but the big money claims are off the table for now.  Leach's attorney's have stated they will appeal to the Texas Supreme Court and not surprisingly were unhappy with the ruling:

In essence, the doctrine permits state institutions such as Texas Tech to deny a man’s written contractual rights and steal his hard-earned labor while paying nothing. . . That is not fair and not what Texas and its citizens stand for.

Sovereign immunity is a complicated, but suffice it to say a Plaintiff is bringing suit against a governmental entity has an uphill battle.  Leach is not coaching and will have to wait on the Texas Supreme Court to see if he can refile his breach of contract claim.  We will keep you posted.

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Texas businesses routinely use non-compete agreements to protect proprietary information in a variety of industries and occupations.  Assuming an employee has executed an enforceable non-compete agreement, what else should Texas employers be doing to enforce these agreements?

To begin with assume a situation where the employee is or has departed.  As part of any exit interview they should be reminded of, provided with, or even asked to acknowledge that they previously signed a non-compete agreement.  This sets the tone from day one of the departure - the company is poised and will likely enforce the agreement.

In the event the employee quits and there is no exit interview, immediately provide them with a reminder letter and provide the agreement.  Use mail, email, delivery or whatever means is appropriate.  The point is to re-notice them.

Make sure the employee has returned all proprietary information (that should be in an employment agreement) and can no longer access company files or email.

Now the hard part - uniformly enforce the non-compete.  If the employee is violating a non-compete, enforce the non-compete. Why?  First of all an ex-employee that is considering competing might reconsider if they know they are going to be sued.  Second, it is very effective for a lawyer to be able to represent to a Judge that the company uniformly enforces the non-compete agreement and takes it seriously.

Yest it can be expensive.  But, if the company has something worth protecting enforcement is an easy decision.

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