The presence of a non-competition agreement in an employment agreement is probably the most mis-understood part of an employment agreement. Sometimes referred to as a covenant not to compete, they take on a wide scope of meaning depending on what the employer is trying to prevent the employee to do once the employee leaves his employer.
In our practice, we typically are confronted with situations where an employee will come to us questioning whether or not a non-competition agreement that was signed years ago is still valid.
In other situations we see clients who don’t remember that they ever signed a non-competition agreement and are reminded of it once they leave the company and are confronted with either a letter from their former employer or their lawyer telling them to “cease and desist” violating the agreement by working for the new employer, or worse, they have been notified that their former employer is seeking a Temporary Restraining Order from a Court seeking to prevent them from violating the agreement.
VALIDITY OF NON-COMPETITION AGREEMENTS
Historically, Texas courts have been reluctant to enforce non-competition agreements on the theory that they constituted a restraint of trade and as such were against the public policy of the state of Texas. Unfortunately, for those seeking to avoid the restrictions placed upon them by these agreements, both the Texas Legislature and the Texas Supreme Court have issued legislation and rulings that make it easier for an employer to enforce non-competition agreements and restrict a former employee’s ability to compete.
ALL IS NOT LOST
Despite the trend of the Courts and the Legislature, Rosenberg and Sprovach has been successful in working with its clients to creatively, strategically and ethically utilize procedures to either defeat or reform (legally re-write) the non-competitive restrictions to make them reasonable under the circumstances. Although it wouldn’t be good practice to share too much of how we take care of the needs of our clients confronted with constraints of these agreements through our website, the basic premise is that in order to be enforceable, an agreement must pass two basic legal hurdles. First, the reviewing court must find that the restrictions comply with Texas law in that they are reasonable in terms of time, scope and geographical location. For example, a non-competition agreement in Texas must be found to be reasonable by the examining court in all three of these aspects. If it is not reasonable, a Texas court can reform or re-write it to make it reasonable. Second, and most important, is that in Texas, an agreement will only be enforced to an extent that's reasonably necessary to protect the legitimate goodwill expectations of the employer. On the face, this may read like a complicated phrase but the plain meaning provides leverage for a Court to use its discretion to loosen the literal restriction when an enforcement of the agreement to the fullest extent would result in an unjust result.
If there is a common theme that has developed in the analyses of these cases through the 25+ years that this firm has been in existence through its various forms, is that there is no clear answer as to how a case involving a non-competition agreement will turn out. We see these types of cases on a weekly basis and would welcome the opportunity to discuss your case situation with you. Click here to fill in the questionnaire and attach the agreement that you would like to discuss.