For Texas companies, enforcing non-compete agreements in other states can be tricky since each state has its own rules about what makes a non-compete enforceable, and some states do not allow them at all. Therefore, any Texas company with out-of-state employees should ask two questions about its employees’ non-compete obligations: (1) are my remote employees’ non-compete agreements enforceable? and (2) will I be able to enforce them in a Texas court if necessary? I have previously written regarding Question 1 here and here, and recently a Texas Court of Appeals addressed Question 2.
In that case, a Texas company sued its Louisiana employee for breach of his non-compete and non-solicitation clauses, breach of fiduciary duty by using the company’s confidential information to compete with it, and tortious interference with the company’s existing business relationships. The company sued the employee in Texas, and he alleged that Texas courts had no jurisdiction (power) over him because he worked entirely from Louisiana, solicited business in Louisiana, and used the company’s confidential information in Louisiana. In short, other than being employed by a company based in Texas, he did not have any contacts with that state so he could not be dragged into a lawsuit in Texas.
The Court of Appeals found that Texas courts had jurisdiction over the employee to decide the breach of contract/non-compete claim because he originally called the company’s president in Texas to solicit employment with the company, thus purposefully availing himself of the Texas forum. This contact was enough to subject him to the jurisdiction of Texas courts. However, Texas courts did not have the power to decide other claims brought by the employer because those claims arose out of the employee’s conduct that took place entirely in Louisiana.
TAKEAWAY: Texas companies that have employees in other states need to make sure both – that their non-compete agreements are enforceable in those states and that they can enforce those agreements in Texas courts. Some of this can be achieved via contractual provisions in employment agreements, and some can be done via hiring, training, and other corporate policies that affect remote employees.
Any Texas business that is planning on expanding outside of Texas in 2016, should conduct an audit of its non-compete agreements and employment practices to ensure that they are properly set up so that the company can enforce the agreements in Texas courts.
Leiza Dolghih is the founder of Dolghih Law Group PLLC. She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at leiza@dlg-legal.com or (214) 531-2403.