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

Employers should always be careful and cognizant of venue provisions in their employment agreements. Many employers will simply include a venue provision making venue mandatory where the home office or headquarters is located, but this doesn’t always make sense in the context of an employment dispute. 

Recently, I reviewed a contract which required mandatory venue in the federal court where the company headquarters was located. Employees who would actually sign the agreement were located in a state a thousand miles away. While it’s nice to have venue in your own backyard, that doesn’t always work for enforcement of the agreement. 

In the context of most post-employment covenants, like non-competes or non-solicitation agreements, it is much easier to enforce these agreements in a venue where the actual defendant/former employee resides. In many of these cases, the employer will want to obtain equitable relief in the form of a temporary restraining order or injunction preventing the former employee from working or soliciting. 

It is much easier to institute and enforce these types of claims in the state or federal court where the actual employee lives, as opposed to one that is many thousands of miles away. In preparing employment agreements, employers should be cognizant of what makes sense in terms of enforcement, if enforcement is a key consideration. 

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Whenever I'm asked to review an employment agreement or contract there are three initial provisions I look for:

1. The Venue Provision:  If there is a dispute over the agreement does it specify where any lawsuit must be filed(City/County/State)?  Does it specify state or federal court? 
2. Arbitration Provision: Does the agreement require arbitration?  Is it governed by AAA rules?  How many arbitrators are required?  Is there a deadline to demand arbitration?  Is there a loser pays provision?
3. Waiver - Is there a jury trial waiver?  These are enforceable in Texas if certain requirements are met, but not all states.

There are of course others, but these provisions define the playing field.  A venue provision may require a litigant to hire a lawyer they wouldn't normally use in another state.  It also might require them to travel.  These things factor into the cost of defending or prosecuting a lawsuit.  In addition to venue, a choice of law provision is always good to have.  As seen here, non-compete agreements are sometimes easier to enforce in certain states as opposed to others.  Does the non-compete agreement specify choice of law?  Arbitration and jury trial waivers eliminate the risk of a runaway jury.  However, the cost of arbitrations continue to rise and an arbitration is not always "cheaper" then a standard lawsuit.  Make sure these issues are taken into consideration before signing or drafting any agreement.

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I liked Jay Shepherds' remarks in Eight Ways to Lose a Non-Compete Case blog entry.    Here they are with my thoughts in italics:

• Putting too much faith in the belief that the court will enforce the language of the non-compete agreement as written.
• Trying to enforce a non-compete against employees who really don't possess any confidential information or customer relationships.   Does the employee really have trade secrets?
• Drafting the non-compete too broadly.
• Focusing only on geography, duration, and scope of the non-compete rather than on the existence of protectable interests. 
• Waiting too long to file.
• Asking for an injunction before you've developed enough evidence. Texas permits TROs and a party can secure limited discovery for the injunction hearing.
• Filing in the wrong jurisdiction. If you want to enforce a non-compete file in the jurisdiction where the former employee is based or working.
• Focusing on the law instead of on the story of the case.

I agree with most of the eight but here is what I would add:

1. Know the law from state to state, the enforceability of a non-compete in Texas is quite different from California;
2. Make sure the state law you want will control.  Along the same lines, if your non-compete specifies Texas law and the employee is in California, make sure the choice-of-law provision will stick;
3. Don't wait to file.  Sometimes you may have to file a lawsuit and seek an injunction before you have all the evidence - but filing early can protect your business and possibly make your former employee think twice about violating the non-compete.
4. Contact your clients.  Just because your company's contact person with the client has departed doesn't mean the business will go.  Call your clients and be up front with what has occurred and how valuable their business is to your company.
5. Marshall your evidence.  Odds are your departing employee began preparing to compete before they left your company.  See if they left a papertrail.  (email, phone calls, accessing company databases, and printing out company information)
6. Remember your targets.  Not only the employee who left, but the company they left for or formed.

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