Although the weather outside suggests otherwise, it is, indeed, December – a time traditionally reserved for reflection upon the year’s achievements. So, let’s take a look at the top five most important non-compete cases in Texas in 2017.
- BM Med. Mgmt. Serv., LLC v. Turner (Tex. App.–Dallas, Jan. 10, 2017)*
Held: The employer failed to show a probable, imminent, and irreparable injury in breach of a non-compete case, as the employee had returned his computer and testified that he did not possess any papers or electronic files related to the employer’s business.
Why it made the Top Five list: Early in each non-compete breach / trade secrets theft case, an employer may have an opportunity to examine the departed employee’s devices and confirm that its confidential information is no longer there. This case demonstrates that taking advantage of that opportunity may result in the denial of a temporary injunction as it eliminates the probability of imminent and irreparable injury since the employee no longer has the employer’s confidential information.
2. In re Pickrell (Tex. App.–Waco, April 19, 2017)
Held: The employer failed to produce evidence necessary to obtain a Rule 202 pre-suit deposition to investigate whether its former employee had honored his non-compete obligations.
Why it made the Top Five list: A party contemplating a lawsuit in Texas may sometimes depose the potential defendant to determine if it has a legal claim against him/her. This procedure is called a pre-suit or Rule 202 deposition. In re Pickrell shows that an employer cannot depose a departed employee for the purpose of investigating whether he/she honored his non-compete agreement based on the employer’s suspicion that the employee may be violating the agreement solely because he is now working for a competitor.
3. Sanders v. Future Com., Ltd. (Tex. App.–Fort Worth, May 18, 2017)
Held: Requiring an employee to repay training costs is not a covenant not to compete and is not subject to the requirements of the Texas Covenants not to Compete Act.
Why it made the Top Five List: This case establishes that Texas employers can deduct reasonable training expenses out of employees’ salaries if they leave before the employer is able to recoup its training costs. Any overreaching, however, by employers may result in a violation of the Texas Covenants not to Compete Act. See, for example, Rieves v. Buc-ee’s Ltd. (below). Additionally, any deductions need to be structured to comply with other laws, such as the Fair Labor Standards Act, and must be verifiable and not speculative. For more information, look here.
4. Rieves v. Buc-ee’s Ltd., (Tex. App.–Houston, Oct. 12, 2017)
Held: Requiring an employee to repay a portion of her salary upon termination is a “restraint on trade” in violation of the Texas Covenants Not to Compete Act.
Why it made the Top Five List: The Court’s decision shows that any provision in the employment agreement that restricts employee’s mobility must be analyzed through the lens of the Texas Covenants Not to Compete Act, not just non-compete clauses. For more information, look here.
5. Horizon Health Corp. v. Acadia Healthcare Co. (Tex. 2017)
Held: The employer failed to establish that the departed employee’s actions caused it lost profits because it could not prove that the customer that went with the departed employee would have signed a contract with the employer.
Why it made the Top Five List: Texas courts require that a company seeking damages based on lost profits produce evidence establishing that prospective customers would have done business with the company absent the defendant’s misconduct. In this case, the company failed to show that a customer that it claimed it lost due to the departed employee’s actions would have signed a contract with that company had it not signed with the departed employee’s new company.
*Keep in mind that any decisions by the Texas Courts of Appeals may be appealed to the Texas Supreme Court, which may ultimately disagree with their findings. Therefore, employers should always consult with a qualified employment lawyer to determine the current status of the law applicable to their particular dispute.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. Her practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108 or fill out the form below.