Happy New Year!

Last year the Texas Supreme Court altered the non-compete landscape in Marsh v. Cook.  As lower courts construe the opinion we will see what its impact is on employers and employees.  The takeaway from the opinion should be that employers will attempt to offer other forms of consideration, like stock options, signing bonuses, etc.

Some interesting stories in the world of non-compete agreement enforcement from around the United States:

 Non-Competes and Arbitration Provisions – An interesting case out of the Tenth Court of Appeals where the Court ruled reformation of a non-compete agreement could not be used to avoid an arbitration clause.

Updating Non-Competes – A nice discussion

                    

Over the last few weeks we’ve discussed some key components in employment contracts including venue and jury trial waivers. Another key provision is choice of law. As was discussed in the Sam Adams case, choice of law  was critical because it permitted the employer to pursue an action against a former employee for breach of a

                    

 

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

In Texas there are other options to prevent departing employers from competing with your business:

A Non-Solicitation: Instead of tying down your employee with a non-compete consider a non-solicitation. The non-solicit will still have to meet non-compete standards, but it can be used for specific customers as opposed to geographic areas. The rub, there will always

                         

#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

                                       

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

                    

In Texas a non-compete agreement has to be reasonable in time and scope and ancillary to an otherwise enforceable agreement.  The latter is difficult to decipher but basically there must be an agreement where the non-compete enforcer has agreed to give something to the enforcee and the non-compete protects what was provided.  In most

                                           
 
Employers  should be asking potential employees and even independent contractors whether they previously signed a non-compete/non-solicit agreement.  Of course, some employees may have forgotten or are unaware they signed one – if possible ask to see their previous employment agreements to screen for any restrictive covenants.
 
What should a potential employer be looking for: 
 
  • a non-compete agreement;
  • a non-solicitation agreement;
  • a non-disclosure agreement; and
  • an anti-raid provision.
 
The first is self explanatory.  A non-solicit could have the effect of a non-compete by keeping a new hire from contacting previous customers/clients.   A non-disclosure could have a non-compete effect depending on the circumstances (i.e. a non-disclosure that prevents an employee from disclosing previous client/customer information).  The anti-raid prevents an employee from attempting to hire folks from their previous place of employment.
 
Why should the employer be worried?  When a company sues over a non-compete they almost always sue the former employee and their new employer.  By doing so a plaintiff can shut down the employee and also the employer who may or may not be benefiting from the former employee’s non-compete breach.
 
Employers should be pro-active in the hiring process in determining whether a non-compete is in place.  If one is in play, the employer needs to assess its risk, hopefully with the help of a lawyer.


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Typically, employers use non-compete clauses to prevent former employees from competing with them after they’ve provided them with trade secrets, customer information, or other proprietary information. Non-solicits can essentially have the same effect – by restricting or preventing a former employee from calling on or contacting former customers. Here is an example:

You hereby agree and