Top 5 Non-Compete Cases in Texas in 2017

yearendAlthough 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.

  1. 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.

 

 

Is Your Non-Compete Agreement Enforceable?

stevecarelEvery state has its own rules about the enforceability of non-compete agreements, with many technical requirements, carve outs for certain industries like medical and technology, and various presumptions or public policy-driven rules regarding employers’ ability to limit competition from former employees.

Recently, I’ve been receiving a lot of inquiries from Texas employers or companies that are moving to Texas regarding: (1) whether non-compete agreements are enforceable in Texas?  (2) what types of non-compete agreements are enforceable in this state?  and (3) when should I enforce my non-compete agreement against a departed employee? Many of these companies already have non-compete agreements with their employees, but are worried about their enforceability in Texas courts. 

I have previously written about how to enforce non-compete agreements in Texas, here, here, and hereSo, the answer to the first question is a resounding “Yes, non-compete agreements are enforceable in Texas.”

The answer to the second question is that, generally, only non-compete agreements with reasonable geographic, time and scope restrictions are enforceable in Texas. 

Assuming a positive answer to the first two questions, the answer to the third question depends on the circumstances of a particular departed employee and the answer to the following questions:

  • What position is the employee in at your company? C-Suite? Sales? Another position that gives him or her access to sensitive information within the company?
  • What special skills the employee has and what specialized training the employee has received in that position? 
  • Is the company where the employee is going a competitor of your company?
  • What position is the departed employee going to take at his or her new place of employment? Is it the same or similar position to what he or she was doing at your company?
  • How likely is it that the employee will use the confidential information he learned while working for you at his new job?
  • What activities does your non-compete prohibit the employee from doing?
  • For how long?  Remember, it must be reasonable.
  • What area does it cover? Reasonableness is key. 
  • Did you provide the right type of consideration for the employee’s promise not to compete?
  • Do you have a non-solicit agreement that will protect your company without having to enforce the non-compete agreement?

All of these factors will come into play if you decide to enforce a non-compete agreement in Texas. Additionally, you will need to consider where to file the lawsuit, the evidence that you will need in order to obtain a temporary restraining order against the employee, and a host of procedural and discovery issues that come along with litigating a non-compete case. 

Bottom Line: Enforcing non-compete agreements is as much of a business decision as it is a legal one.  Having a non-compete agreement that is legally enforceable, allows you to decide whether it makes business sense to enforce it against a particular employee.  Without a legally enforceable non-compete agreement, however, the business reasons may not even matter. 

Leiza litigates non-compete and trade secrets lawsuits in a variety of industries. If you are a party to a dispute involving a noncompete agreement in Texas, contact Leiza at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.

2017 Welcomes Changes in Non-Compete Laws

imagesThis year, California, Illinois and Nevada amended their non-compete statutes to help protect the employees’ right to change employers vis-à-vis the employers’ right to restrict unfair competition. Idaho, Maryland, Massachusetts, New York, and Washington considered various amendments, but were unsuccessful in signing them into law, which means they will probably try again in 2018.   

California

An amendment to the California Labor Code, which became effective on January 1, 2017, prohibits employers from requiring employees to litigate or arbitrate employment disputes (1) outside of California or (2) under the laws of another state. The only exception is where an employee was individually represented by a lawyer in negotiating his employment contract.

Penalties apply to an employer who requires a California employee who primarily works and resides in California to sign “as a condition of employment,” an agreement with a provision that requires the employee to adjudicate disputes arising in California in a forum outside of California or under the law of another state.

Illinois

Illinois passed the Freedom to Work Act, effective January 1, 2017, which bars non-compete agreements for workers who earn less than the greater of the federal, state or local minimum wage, or $13.00 an hour.

Nevada

In June of this year, Nevada amended its non-compete statute to state that a non-competition covenant may not restrict a former employee from providing services to a former customer or client if: (1) the former employee did not solicit the former customer or client; (2) the customer or client voluntarily chose to leave and seek the services of the employee; and (3) the former employee is otherwise complying with the non-competition agreement.

The statute also now provides that if there is a reduction in force, reorganization, or similar restructuring, the laid-off employee’s non-competition agreement is only enforceable during the time in which the employer continues to pay the employee’s salary, benefits, or equivalent compensation to the employee.  

Finally, the statute now allows “blue-penciling” and gives the Nevada courts the ability to strike or modify unreasonable terms or provisions from a non-compete agreement and enforce the revised agreement.

More and more states are trying to strike a balance between the workers’ right to change employers and the companies’ right to protect their business interests and goodwill. The end result is a patchwork of non-compete statutes that impose different requirements on employers that operate in different states.  Companies that have employees in several states should consult with legal counsel to make sure that their post-employment covenants are enforceable with respect to all of their employees, regardless of the location.

Leiza represents companies in business and employment litigation.  If you need assistance with a business or employment dispute contact Leiza for a confidential consultation aLeiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.

 

Can an Employee Prepare to Compete with His Employer While Still on the Employer’s Payroll?

non-compete-agreement-lawyer-philadelphiaIn Texas, employees have the right to resign from employment and go into business in competition with their employers (absent a non-compete agreement). There is nothing legally wrong in engaging in such competition or in preparing to compete before the employment terminates.

Thus, as a general rule, an employee can prepare to compete with the employer while still on the employer’s payroll.   There are several caveats to that, however:

  1. Employees cannot use their employers’ resources – such as company-provided computers – to engage in the preparatory activities.
  2. Employees cannot prepare to compete while on the clock.
  3. Employees cannot use their position within the company and their knowledge of the company’s trade secrets and confidential information to divert business to their new company or to create business opportunities for their new business.

Where an employee is discovered to have engaged in some activities in anticipation of his new endeavor while still working for his old employer, the question often arises whether he was preparing to compete or actually competing with the employer.

For example, registering a company with the Secretary of State is a clearly preparatory activity.  However,  advertising the formation of the company on social media or creating a website announcing that the company will be opening soon can be viewed as a competitive activity.  In illustration, the Pennsylvania Superior Court recently held that a company which set up a Facebook page announcing that it was going to open a veterinary clinic “soon” and provided a link to a map showing the location of the future clinic was not merely “preparing to compete” but was actually competing and soliciting customers.  The court explained that:

Upon review of that document, it is obvious that, collectively, the [Facebook] posts, “coming soon” announcement, and map directions, are tantamount to a solicitation of past or future clients in contravention of the non-compete clause. The resounding purpose of the Facebook page, and the attendant communications therein, was to inform the followers of the page, including former clients, that he intended to open a new clinic and to keep them apprised of his progress. There is but one reason for O’Laughlin to create the O’Laughlin Veterinary Services Facebook page and maintain contact with former clients: to solicit their business. 

TexasBarToday_TopTen_Badge_VectorGraphicBOTTOM LINE FOR EMPLOYERS: While employees have the right to prepare to compete before their employment is terminated, they cannot cross the line and actually compete with their employers.  If you learn that your employee is announcing on social media or online that he or she is getting ready to go into competition with your company, it might be a good time to call an employment lawyer.

Leiza represents companies in business and employment litigation.  If you need assistance with a business or employment dispute contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.

Top 10 Mistakes Employers Make With Non-Compete Agreements

good-wifeWhile helping hundreds of companies enforce their non-compete agreements and advising many employees on how to get out of them, I noticed that most companies make the same mistakes when it comes to drafting and enforcing their non-compete agreements. In this post, I share the top ten mistakes that often end up costing business their clients, goodwill, and a ton of legal fees:

  1. Not signing non-compete agreements with employees. It seems like a no-brainer, but there are still a lot of companies out there that do not require their employees to sign any non-compete agreements. This is a mistake.  A reasonable non-compete agreement can benefit both the company and the employees. A company is more likely to invest into training of employees with non-compete agreements, and employees will still remain free to work in their chosen field after leaving the employer, subject to a reasonable geographic limit. 
  2. Having restrictions that are too overbroad. Overreaching in non-compete agreements can backfire in that employees feel like they have no choice but to violate them in order to make a living and courts are not likely to grant a temporary retraining order or a temporary injunction on a non-compete that is clearly overbroad. 
  3. Not having a legitimate business interest to protect. A Texas employer must share its confidential information or goodwill with an employee in order to create an enforceable non-compete agreement.  An hourly employee, such as a sandwich-maker or a mechanic, is not going to have access to any confidential information or specialized training.  Thus, most of the time, there would be no legitimate business interest in having such employees subject to a non-compete. Therefore, before asking an employee to sign a non-compete agreement, employers should ask, “What specific business interest am I trying to protect?”
  4. Making all employees execute the same non-compete agreement.  Requiring the same 2-year / 200-mile non-compete agreement for sales people, secretaries, and C-level executives raises a red flag that the company is simply trying to prevent competition and is not protecting a legitimate business interest.  Employees that perform different tasks or serve a different purpose should have different non-compete restraints depending on what they do in the company.
  5. Not providing a proper consideration.  Different states require different types of consideration for non-compete agreements. In some states, just a promise of future employment is sufficient. In other states, an employer must pay money to an employee in exchange for the promise not to compete.  Texas companies should make sure that their non-compete agreements are supported by the right type of consideration in the state where they plan to enforce the non-compete agreements.
  6. Not having new consideration.  When asking an already-existing employee to sign a non-compete agreement, employers must provide new consideration for such agreement.  For more information, see my previous post here.
  7. Not enforcing non-compete agreements. Once the proper non-compete agreements are in place, companies should make it a policy to enforce them.  Otherwise, the agreements lose their effectiveness with employees, who quickly learn from co-workers that the company never enforces the agreements. 
  8. Not enforcing non-compete agreements fast enough.  This is one of the gravest mistakes for companies in terms of consequences. The longer a company waits to seek a temporary restraining order against an employee who is violating his or her non-compete agreement, the more likely the court is to deny the restraining order because the company cannot show an “imminent” and “irreparable” injury.   In other words, if the company has not tried to stop the bleeding, how bad could the bleeding really be and does the court really need to enter an emergency order?
  9. Not providing confidential information. As mentioned above, a proper consideration for a non-compete agreement in Texas includes a company’s promise to provide confidential information to the employee.  Companies, however, must deliver on that promise and actually provide such confidential information in order to make their non-compete agreements enforceable.
  10. Not saving an electronic version of the signed non-compete agreements.  Companies must make sure that they save an electronic signed version of their non-compete agreements in a location where employees cannot access and delete them or take them.

BOTTOM LINE:  Spending some money at the front end of an employment relationship to make sure that the company is protected with a valid non-compete under Texas law can save a company ten times that amount in legal fees when the times comes to enforce the non-compete agreement.

Leiza litigates non-compete and trade secrets lawsuits in a variety of industries in federal and state courts. For a consultation regarding a dispute involving a noncompete agreement or misappropriation of trade secrets, contact Leiza at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.

Enforcing Non-Compete Agreements in Arbitration in Texas

non-compete-agreement-lawyer-philadelphia

When it comes to enforcing non-compete agreements, companies usually want to stop the bleeding right away.  This is usually done by obtaining a temporary injunction in court, which preserves the status quo and prevents the departed employee from competing with the former employer while the parties sort out whether the agreement is enforceable against that employee, whether its restraints are reasonable, and what damage has been caused by the employee’s competition in violation of the non-compete agreement.

For those companies that have arbitration agreements with their employees, a noncompete violation will usually have to be arbitrated.  And while an arbitration may generally provide a faster, cheaper, and more confidential route for resolving a noncompete dispute than litigation, it can be an inferior process when it comes to obtaining a temporary injunction in a situation where time is of the essence.

While the relevant arbitration rules usually allow an arbitrator to grant a temporary injunction or enter some sort of preliminary relief, a company that wishes to obtain such relief must first select an arbitrator and then schedule a hearing.  These steps can result in a loss of precious time – days or weeks during which the departed employee has the time to ramp up the competition, destroy relevant evidence and cover his tracks.  In contrast, the same company may obtain a temporary restraining order in court the same day it files a suit to enforce the non-compete agreement.

For that reason, every arbitration agreement should have a carve out for injunctive relief – the clause that allows a company to obtain a temporary restraining order as soon as it learns of a violation of the non-compete agreement.  Once the company has the court order in hand, it may safely proceed with an arbitration and take its time to investigate the violation and lay out its case. 

In deciding whether to arbitrate a non-compete dispute, seek a temporary restraining order from a court, or both, companies should consider the following  issues:

  1. Does the company arbitration agreement have the necessary language to allow the company to obtain a temporary relief in court?
  2. Will the company be waiving the arbitration clause by obtaining emergency relief in court? Hint: A recent case from the Houston Court of Appeals held that seeking injunctive relief in court does not waive an arbitration clause if its purpose is to simply preserve the status quo.  See Fisher v. Carlile, et al.
  3. Should the company file a claim of arbitration first and then seek an injunction in court or vice versa?

Leiza litigates non-compete and trade secrets lawsuits in a variety of industries in federal and state courts. If you are a party to a dispute involving a noncompete agreement or misappropriation of trade secrets, contact Leiza at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108. 

Is a Non-Compete Agreement Without Geographical Restriction Enforceable in Texas?

imagesThis 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 litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108. 

Special Rules for Non-Solicitation Agreements in the Financial Services Industry

2776The financial services industry has its own set of rules when it comes to enforcement of non-solicitation agreements.  In 2004, a handful of the largest financial firms signed a document called Protocol for Broker RecruitingSince then, over a 1,000 firms became signatories to the Protocol, agreeing to abide by the rules that are meant to curtail non-solicitation litigation among competing firms.  For those firms that are signatories (and many are not), as long as the departing broker follows the procedure laid out in the Protocol, s/he and the new employer are safe from being sued for violation of the broker’s non-solicitation agreement. However, the Protocol’s safe harbor only applies if the broker moves between two Protocol signatories. The first question is whether the companies involved are Protocol signatories.

Under the Protocol, a broker transitioning between signatory firms may take only the following information:  (1) client name, (2) address, (3) phone number, (4) email address, and (5) account title of the clients that they serviced while at the firm. Broker’s clients are only those companies and individuals to whom the broker provided services for which he would have received commission. A broker is prohibited from taking any other information or documents than the ones specifically listed in the Protocol. The second question is whether the broker took any information beyond what is allowed under the Protocol.

Furthermore, a broker must resign in writing, deliver the resignation to local branch management, and include with the resignation letter a copy of the client information that will be taken, including account numbers.  The broker’s compliance with the Protocol does not have to be perfect. S/he simply must show “substantial” and “good faith” compliance with the requirements.  The third question is whether the broker’s compliance was in good faith

To be in compliance with the Protocol, the broker may not start soliciting clients to move to the new firm while the broker is still engaged with the old firm while he is planning to move.  A broker also may not share client information at the new firm for solicitation by other brokers. The Protocol also does not protect corporate raiding, i.e. one firm poaching a group of employees or another firm’s entire branch.  The fourth question is whether the broker violated any of the express prohibitions of the Protocol

Finally, although a firm that is deciding whether to bring a suit against a former broker or a competitor firm must consider whether the Protocol applies, it should also analyze a variety of state and federal law claims that may be applicable in such a situation.  In particular, non-compete agreements and non-disclosure agreements may provide independent bases for enforcement even if the non-solicitation restraints are neutralized under the Protocol. Trade secrets misappropriation under the state or federal statutes as well as breaches of common law duties of loyalty may also be implicated. 

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

Will Ban the Non-Competes Movement Lose Its Momentum During the Trump Administration?

donald_trump_rnc_h_2016It’s no secret that the Obama administration made a push, especially towards the end, towards limiting the use of non-compete agreements by employers around the country. The White House commissioned not one but two reports on this topic, both of which concluded that non-compete agreements stifle innovation, reduce job mobility, and negatively impact economic growth.  

Several states around the country seemed to join the White House’s view on non-compete agreements in passing statutes limiting their use. Illinois, for example, recently enacted the Illinois Freedom to Work Act, 5 ILCS § 140/1 et. seq., which prohibits private employers from entering into non-competition agreements with “low-wage employees.” Utah passed the Post-Employment Restrictions Act, Utah Code § 34-51-101 et seq., in March 2016, restricting non-competes’ length to 1 year.  Massachusetts tried to pass a similar legislation this year, but failed. And New York State Attorney General Eric Schneiderman announced that he will propose legislation in 2017 to limit the use of non-compete agreements in New York.  

Will this push to limit non-compete agreements continue during the Trump administration?  My prediction is that it won’t.  Of course, as with many other areas of the law, predicting what Trump will or will not do, is like reading tea leaves – nobody really knows. However, here are my top three reasons for thinking that the Trump Administration won’t pursue the same stance on non-compete agreements as the Obama Administration. 

First, Trump is a savvy businessmen and an employer. Therefore, he knows the value of non-compete agreements to employers and, without a doubt, has used them himself in his many businesses. 

Second, Trump has demonstrated that he is not above using such agreements in what some would view as overreaching situations.  For example, he did not shun from using non-compete agreements with the volunteers for his political campaign, even though the volunteers were not paid compensation for their services and probably performed tasks that did not involve any confidential information.

Third, Trump’s recent appointment of Andrew F. Puzder – the former CEO of a fast-food franchise – as the Secretary of Labor, suggests that his focus may not be on helping low-wage employees. Mr. Puzder had openly criticized the minimum wage increase that was supposed to go into effect this December and is commonly perceived as an ally for employers.  His position on ACA, minimum wage, and the joint-employer rule promulgated by the NRLB, is contrary to the position taken by the Obama administration. Thus, if he takes a 180-degree shift from the Obama administration’s stance on non-competes, such position won’t come as a surprise. 

Employers should stay tuned to see how the Trump’s policy on non-competes develops in 2017…

Leiza litigates unfair competition, non-compete and trade secrets lawsuits on behalf of companies and employees, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

Five Non-Compete Agreements Myths in Texas for Employees

share-knowledge-715x400The old saying “ignorance is bliss” may be true in many situations, but not when it comes to non-compete agreements in Texas.  Over the years, I have identified five most common misconceptions about such agreements from my discussions with clients, friends, and even other lawyers.  It’s time to dispel these common myths once and for all:

Myth #1: Non-compete agreements are not enforceable in Texas.  This is absolutely false. In Texas, non-compete agreements are enforceable if they meet certain requirements spelled out in the Texas Covenants Not to Compete Act.  Even if they do not meet those requirements, a lot of times, a judge can reform, i.e. rewrite, them to make them more “reasonable” and then enforce them.

Myth #2: Texas is a right to work state, so an employer cannot prevent employees from going to work for a competitor. This is also false. A “right to work state” simply means that employees in Texas cannot be fired for joining unions.   It has nothing to do with the enforceability of the non-compete agreements. So, while Texas is a right to work state, that doesn’t mean that the non-competes here are invalid. 

Myth #3: An employer threatening to fire an employee if s/he doesn’t sign a non-compete agreement makes such agreement invalid. This is false. Because Texas is an at-will employment state, an employer may change the terms of employment at any time, including adding non-compete restraints to an already-existing employment relationship. Thus, with rare exceptions, employers may force employees to sign non-competes under a threat of termination.

Myth #4: Since an employer never enforced its non-compete agreements, it won’t/can’t enforce it against a particular employee.  Again, this is false.  Employers typically consider many factors when deciding whether to enforce a non-compete agreement, so while they might decide not to enforce the agreement against one employee, they may be motivated to do so against another employee. 

Myth #5: If a non-compete agreement looks/sounds reasonable, there is no way to fight it. This is false. There are many defenses to non-compete agreements, and whether a particular non-compete agreement will hold up in court depends on the specific language of the agreement as well as employee’s job duties, length of employment, access to confidential information and a myriad of other factors.

The bottom line is that employees in Texas cannot afford to ignore non-compete restraints in their agreements and, when in doubt, should seek legal advice to understand the consequences of signing a non-compete agreement, or switching jobs or starting a competing business when subject to a non-compete.  Planning ahead is key when it comes to non-compete agreements in this state. 

Stay tuned for part II to find out common  non-compete agreements myths for employers. 

Leiza litigates unfair competition, non-compete and trade secrets lawsuits on behalf of companies and employees, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.