» Update on Non-Compete Agreements in Texas

Update on Non-Compete Agreements in Texas

It’s been almost four years since the Texas Supreme Court decided the landmark non-compete case of Sheshunoff v. Johnson and almost two years since it reached a decision in Mann Frankfort Stein v. Fielding. The battle over non-compete agreements in Texas rages on. Austin business litigation lawyer and employment lawyer Gregory D. Jordan offers some insights into the cases.

The important non-compete cases of Sheshunoff v. Johnson and Mann Frankfort Stein v. Fielding have come and gone. Even though the Texas Supreme Court articulated new standards in these cases for determining whether a non-compete agreement is enforceable, there’s still a great deal of rancor and disagreement over non-compete agreements in Texas. Why?

The short answer seems fairly straightforward. Although a non-compete agreement can protect one’s business, it can just as easily destroy another’s livelihood. “When a company’s survival may depend on enforcing a non-compete, but that same non-compete may effectively kill a former employee’s ability to earn a good living, disagreements are bound to occur,” says Austin, Texas-based business litigation attorney and employment lawyer Gregory D. Jordan. “If you are considering signing a non-compete agreement, or if you are involved in a dispute over a non-compete, you need a good lawyer.”

A pertinent issue about non-compete agreements is their enforceability. “Whether a non-compete is enforceable is often a question of whether the consideration for the non-compete is legally appropriate,” Jordan says.

The Sheshunoff case revisited the court’s 1994 decision in Light v. Centel Cellular Co., and overturned years of established law in Texas. The Court held that a non-compete agreement with an at-will employee could be enforceable if the employer promised to provide confidential information to the employee at some time in the future. The Mann Frankfort Stein case, on November 13, 2008, extended that holding to say that the promise from the employer could be implied. “It did not have to be in writing or even spoken,” Jordan says.

The ongoing disputes over non-competes tend to focus on two areas: (1) is the agreement enforceable and (2) are the restrictions reasonable. There have been dozens of appellate cases dealing with non-competes decided since Sheshunoff, and there are more and more creative arguments being raised on each of these issues.

“The bottom line,” Jordan says, is that “non-competes in Texas continue to be an evolving area of law. It will be very interesting to see how the courts will address all of the new arguments that are being raised to attempt to enforce these agreements or to invalidate them.”

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