Source: http://www.myemploymentlawyer.com/wiki/Enforcability-of-Texas-Non-competition-Agreements.htm
Timestamp: 2019-04-20 01:06:48+00:00

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Enforcability of Texas Non-competition Agreements.
must not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promise.
Tex. Bus. & Com. Code § 15.50.
In 2006, the Texas Supreme Court held that non-compete covenants can be considered unilateral contracts, made at the time a non-compete is signed, that become binding once an employer provides the employee confidential information. Sheshunoff Management Services, L.P. v. Johnson, 209 S.W.3d 644, 651 (Tex. 2006). Sheshunoff overruled the prevailing Texas Supreme Court decision interpreting § 15.50 to require that the non-compete covenant must be supported by a valid promise at the time the agreement is made. Light v. Centel Cellular Co., 883 S.W.2d 642 (Tex. 1994).
Interests Protected by Non-competition Agreements.
Business goodwill and confidential or proprietary information are interests worthy of protection by a non-compete. See Sheshunoff, 209 S.W.3d 644 at 649. In addition, knowledge of a unique customer base and knowledge of the equipment or products used by each of the employer's customers are also protectable interests. See Stone v. Griffin Comm. & Security Systems, Inc., 53 S.W.3d 687, 694 (Tex. App.--Tyler 2001, no pet.). Likewise, information concerning acquisition strategies, compensation and benefits formulas, and payment rates may be considered protectable interests. See Teel v. Hospital Partners of America, Inc., No. H-06-cv-3991, 2008 U.S. Dist. LEXIS 8679, 2008 WL 346377, *7 (S.D. Tex. Feb. 6, 2008).
A reasonable geographic scope is generally considered to be the territory in which the employee worked for the employer. See Zep Mfg. Co. v. Harthcock, 824 S.W.2d 654, 660 (Tex. App.--Dallas 1992, no writ). If the geographical scope of the non-compete is unreasonably large, the court must reform the contract so that it is enforceable. TEX. Bus. & Comm. CODE § 15.51(c); Evan's World Travel v. Adams, 978 S.W.2d 225 (Tex. App.--Texarkana 1998, pet. denied) (holding that the agreement was only enforceable in the one county in which employee worked for former employer); Zep Mfg. Co. v. Harthcock, 824 S.W.2d 654, 661-62 (Tex. App.--Dallas 1992, no pet.) (holding that a non-compete that contained no geographical restriction was unenforceable, but declining to reform because the plaintiff had dropped injunctive relief claim).
Texas courts note that non-compete covenants that contain either an industry-wide exclusion from subsequent employment and/or that prevent contact with clients with whom the employee had no contact are unenforceable. Peat Marwick Main & Co. v. Haas, 818 S.W.2d 381, 386-87 (Tex. 1991) (holding that the accounting firm's protectable business interest was its client base, and the non-solicitation provision was unreasonable under § 15.50 because it applied to customers and territory with which the employer had not had actual contact); Hardy v. Mann Frankfort Stein & Lipp Advisors, Inc., 263 S.W.3d 232, 250 (Tex. App.--Houston 2007, pet. granted); General Devices, Inc. v. Bacon, 888 S.W.2d 497, 504 (Tex. App.--Dallas 1994, no writ) (non-compete was unreasonable where it contained no geographical or time limitation); John R. Ray & Sons, Inc. v. Stroman, 923 S.W.2d 80, 85 (Tex. App.--Houston 1996, writ denied).
W.R. Grace & Co. Dearborn Div. v. Mouyal, 262 Ga. 464, 422 S.E.2d 529, 533 (Ga. 1992) (upholding non-compete covenant that had no geographical restriction but prohibited employee from contacting customers he contacted during the last two years of his tenure at employer).
In contrast, where an employee has no specialized training, has not acquired trade secrets, and does not have access to confidential customer lists, a non-compete is not necessary to protect the employer's business interests. Daytona Group of Texas, Inc. v. Smith, 800 S.W.2d 285, 289-90 (Tex. App.--Corpus Christi, 1990) (holding that non-compete was not necessary where salesperson for radio had no specialized knowledge and radio's customers were public knowledge and she did not solicit them after leaving the station).
Section 15.51 requires a court to reform a non-compete agreement if it is unreasonably broad in scope. TEX. BUS. & COMM. CODE §15.51(c). Some Texas appeals courts have suggested, but not held, that reformation is appropriate at the temporary injunction stage.

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