This exact question is currently being decided by the Texas Supreme Court, which earlier this month held oral arguments in Horizon Health Corp. v. Acadia Healthcare Company, Inc.
Under the Texas Noncompete Act, a noncompete agreement is enforceable in Texas only if it is:
Ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.
The non-compete agreement in Horizon Corp. v. Acadia Healthcare did not contain an express geographical limitation, but barred employees from:
- seeking work in, or independently establishing, a psychiatric contract management company;
- being employed by “company clients, hospital affiliates or hospital joint venture partners,” or
- engaging in any business relationship with those hospitals for 1 year after the end of employment.
Horizon argued that the non-compete agreement is not enforceable because it does not contain an express geographical limitation. Acadia argued that because the agreement is limited to certain identifiable set of companies or clients, it did not need to have a geographical limit to be enforceable under the Texas Covenants not to Compete Act. The parties presented their oral arguments to the Texas Supreme Court on March 1, 2017.
BOTTOM LINE: Until there is a ruling from the Texas Supreme Court resolving the issue of whether noncompete agreements must contain an express geographical limitation, to be safe, companies should include such limitation in the agreements in additional to any limits on client solicitation. Stay tuned to learn how the Texas Supreme Court rules on this issue.
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.
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