Recently, a federal district court clarified that reformation cannot be used to cure major defects in a poorly-written non-compete agreement. Specifically, reformation is not available where a key term of a non-compete agreement is missing from the document entirely. In this case, the non-compete did not contain a temporal limit, i.e. it was not limited to a particular time period. The court refused to reform the agreement and dismissed the case explaining the rationale for its decision as follows:
It is the Court’s view that it is empowered only to reform existing terms. Where the Agreement lacks a critical term, such as a time limitation, placing a time limitation in the Agreement is to rewrite the Agreement. The Agreement lacks an unenforceable provision that the Court can revise; therefore, reformation is impermissible.
CONCLUSION: Texas employers seeking to enter into non-compete agreements with their employees should make sure such agreements meet the requirements of the Texas Covenants Not to Compete Act, as a failure to meet such requirements can prove to be fatal to an enforcement action. The strategy of drafting overbroad non-compete agreements and then relying upon courts to fix or re-write them is an expensive way of enforcing non-competes, and it may not work in those cases where the agreement is missing a key term.
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.