Source: https://fiveminutelaw.com/category/non-competes/
Timestamp: 2019-04-21 20:45:06+00:00

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If you’re buying a business in Texas and the seller agrees to a non-compete, will it hold up in court? The short answer is yes, but the non-compete should be reasonably limited to the purpose of protecting the goodwill that you are acquiring with the other assets of the business. It’s also a good idea to have the purchase agreement recite that the purchased assets include the goodwill of the business.
To understand why, let’s start with the two requirements in the Texas Covenants Not to Compete Act, affectionately known as TCNCA: (1) a non-compete must be “ancillary to an otherwise enforceable agreement” (whatever that means) and (2) a non-compete must be reasonably limited in time, geographic area, and scope of activity.
How do you make a non-compete “ancillary” to an otherwise enforceable agreement? As I explain in this short video, the most common way is to have a non-compete tied to a confidentiality agreement between an employer and an employee. This is usually sufficient to meet the “ancillary” requirement, as long as the agreement explicitly or implicitly promises to provide confidential information to the employee and the employer actually provides confidential information.
A sale of a business is different. In a typical sale, the buyer acquires the assets of the business, including goodwill. And in this information age, the goodwill is often the most valuable asset of the business.
Trouble is, you can’t just load goodwill on a truck like it’s office furniture or shop tools. Goodwill primarily consists of relationships with customers or clients, and in many cases the customer relationship is with an individual who works for the business, not so much the business itself.
A non-compete is ancillary to the sale of the goodwill because it is necessary to make the transfer effective. See, e.g., Chandler v. Mastercraft Dental Corp. of Texas Inc., 739 S.W.2d 460, 464-65 (Tex. App.–Fort Worth 1987, writ denied) (“the covenant was necessary to protect the business goodwill, the key asset”). Imagine if the seller, after selling the goodwill, could set up a new business the next day and start soliciting the sold business’s customers. Then the buyer would not really get the benefit of the transferred goodwill.
If the law refused to enforce a non-compete in this situation, it would hurt the buyer and the seller. No buyer is going to pay the full value of the goodwill without assurance that the seller cannot immediately start competing for the customers of the business. And then business owners would not be able to cash out the full value of their businesses.
So, if anything, enforcing a non-compete makes more economic sense in the sale of a business than in the employer-employee context. That explains why even California, which generally prohibits non-competes, has an exception for the sale of a business. See Cal. Bus. & Profs. Code § 16600-16602.5.
It also explains why Texas courts have said that “[a] noncompete signed by an owner selling a business is quite different than one signed by an employee.” Texas courts have been more inclined to enforce long, or even limitless, time periods barring competition after a sale of a business. For example, in Oliver v. Rogers, 976 S.W.2d 792, 801 (Tex. App.—Houston [1st Dist.] 1998, pet. denied), the court held that the lack of a time limitation did not render a non-compete unreasonable when it was part of the sale of a business.
But let’s not get carried away. Since 1989, all Texas non-competes are governed by the TCNCA. In addition to the “ancillary” requirement, the statute requires a non-compete to contain “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.” Tex. Bus. & Com. Code § 15.50(a). To the extent that any Texas case—especially a pre-1989 case—suggests that these limitations are not required in the sale of business, it should be taken with a grain of salt.
The non-compete statute does give the buyer of a business one advantage that may not be immediately obvious. In an employment agreement, the burden of proving the reasonableness of the non-compete is usually on the employer. But in the sale of a business, the burden of proof will usually be on the seller to show that the non-compete is unreasonable. See Tex. Bus. & Com. Code § 15.51(b) (placing burden of proof depending on whether the “primary purpose” of the agreement is to obligate the promisor to render “personal services”).
But again, reasonableness is still required. And here’s the slightly counter-intuitive part: if you represent the buyer in the sale of a business, you don’t want to go overboard on drafting a super-broad non-compete. In fact, it will usually be in your client’s interest to tailor the non-compete as narrowly as possible to the legitimate purpose of protecting the goodwill of the business. Anything more is too much.
First, you should include a reasonable time period. The time period should be no longer than necessary to protect the goodwill. Will the previous owner’s relationships with customers really have significant value four or five years later? Consider whether a two or three year period would be enough.
Second, you should include a geographic area. This will depend on the type of business, but generally a reasonable geographic area will coincide with the area where the company is doing business with its existing customers.
Third, the scope of activity restrained should be limited. This is perhaps the most neglected limitation. Remember, the purpose is to protect the goodwill of the business, which means relationships with existing customers. If the non-compete would bar the seller from competing in any way, for any customers, a judge might consider it an unenforceable “industry-wide exclusion.” The case law prohibiting industry-wide exclusions focuses on the employer-employee context, but the same concept can be applied to the sale of a business.
Ok, the seller of a business might say, but why not draft the non-compete as broadly as possible, and then if there’s a dispute you negotiate down from there?
Good question. Texas non-compete law is quite “pro-reformation,” especially in comparison to some other states. If a non-compete is unreasonably broad, that’s not the end of the story. The statute requires the trial court to reform the agreement to the extent necessary to make it reasonable. So, all is not lost if the buyer’s lawyer drafts the non-compete too broadly.
But there is a cost to be paid for making the non-compete too broad. First, if things go wrong and the seller of the business starts competing for the business’s customers, the new business owner may need to go to court to get a temporary injunction enforcing the non-compete. As a litigator who handles temporary injunction hearings, I can tell you it will be easier to make a case for a temporary injunction if the non-compete is already reasonably limited.
Second, if the non-compete is written too broadly, it effectively means that the buyer will be unable to recover damages for the seller’s breach. See Tex. Bus. & Com. Code §15.51(c). That’s a big bargaining chip to give away by making the non-compete too broad.
So if you represent the buyer, consider making the non-compete as narrow as you can while still protecting the goodwill your client is buying.
That brings up one more tip: the agreement should actually provide for the sale of the goodwill. If the purchase agreement does not expressly identify the goodwill as part of the assets being sold, there is a risk that a judge could say that the non-compete was not ancillary to an otherwise enforceable agreement.
You could argue the sale of the goodwill is implied when all the other assets of the business were sold. But why chance it? Unless there is a good reason not to include the goodwill (maybe a tax reason?), the safer course is to include an express recitation that the goodwill is part of the assets being sold.
Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Occasionally he writes a boring, useful post.
 Heritage Operating, L.P. v. Rhine Bros., LLC, 02-10-00474-CV, 2012 WL 2344864, at *5 (Tex. App.—Fort Worth June 21, 2012, no pet.) (mem. op.).
 See, e.g., Bandera Drilling Co. v. Sledge Drilling Corp., 293 S.W.3d 867, 872-75 (Tex. App.–Eastland 2009, no pet.).
 The Texas Supreme Court has recognized that an agreement, such as an agreement to provide confidential information, can be implied in a non-compete. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009).
Is a Non-Solicitation Agreement a Non-Compete?
The short answer is yes. A non-solicitation agreement is a form of non-compete.
But why does this issue come up? And what difference does it make?
To understand why, let’s back up a bit. It is common for an employment agreement to contain both a “non-solicitation” section and a “non-compete” section. A non-solicitation clause places restrictions on the employee soliciting company customers after leaving the company. A non-compete clause is broader: it places restrictions on the employee working for a competitor after leaving the company.
So what about a covenant not to “solicit”? How does that fit into the statutory scheme?
There are really only two options. A contractual covenant not to solicit is either a “restraint of trade or commerce,” which is illegal, or a form of “covenant not to compete,” which is enforceable if it meets the requirements of the non-compete statute.
It’s pretty easy to see why a non-solicitation agreement is a restraint of trade or commerce. Think about it. Imagine if Apple and Samsung signed a contract saying that Apple will not solicit smartphone customers in Asia, and Samsung will not solicit smartphone customers in North America. The Justice Department would be all over that.
It should be no different if the non-solicitation agreement is part of an employment contract.
You can see where this is headed. It shouldn’t help the company to argue that the non-solicitation agreement is not a “non-compete.” If that’s true, it’s an illegal restraint of trade. I’ve made this point before. See When is a Non-Compete Not a Non-Compete in Texas?
But even aside from this dilemma for the employer, there are two reasons why a non-solicitation agreement should be treated as a “non-compete” that is subject to the restrictions in the non-compete statute.
Hey, it doesn’t use the word “compete,” so it’s not a “covenant not to compete” subject to the statute, is it?
The second reason that a non-solicitation agreement is a “covenant not to compete” is that the Texas Supreme Court has said so. This is more important than the first reason.
In Marsh USA Inc. v. Cook, 354 S.W.3d 764, 768 (Tex. 2011), the Texas Supreme Court clarified Texas law on enforceability of non-competes. The agreement in Marsh prohibited the employee from soliciting a certain type of business from people who were clients or prospective clients of his employer within two years of his termination.
Covenants that place limits on former employees’ professional mobility or restrict their solicitation of the former employers’ customers and employees are restraints of trade and are governed by the Act [meaning the Texas Covenants Not to Compete Act].
In support, the court cited two state court cases and two federal court cases treating non-solicitation agreements as non-competes.
It matters because a covenant not to compete must meet the two requirements of the statute. First, it must be “ancillary to an otherwise enforceable agreement.” Second, it must be reasonable in time, scope, and geographic area. You can watch a brilliant five-minute video on these requirements here.
The geographic area requirement is often a sticking point. Despite the unambiguous requirement in the statute, it is not unusual to find a non-solicitation clause, or even a broader non-competition clause, that contains no geographic limitation. When that happens, the employee can argue that absence of a geographic limitation renders the clause unenforceable as written.
That’s exactly one of the arguments the employee made in the recent case White v. Impact Floors of Texas, LP, No. 05-18-00384-CV, 2018 WL 6616973, at *3 (Tex. App.—Dallas Dec. 18, 2018, no pet. h.).
In Impact Floors, the trial court granted a temporary injunction enforcing the non-solicitation and non-disclosure provisions of an employment agreement. Id. at *1-2. On appeal, the employee argued the trial court was wrong to enter the injunction because the employment agreement contained no geographic limitation. Id. at *3.
That should have been a pretty easy issue for the Court of Appeals, right? As we’ve seen the Texas non-compete statute applies to a non-solicitation agreement, and the statute expressly requires a reasonable geographic limitation.
But the Court of Appeals rejected the employee’s argument on the ground that the injunction only enforced the non-solicitation and non-disclosure provisions of the agreement, not the non-compete provision. Id. at *3.
I’ll leave it to the appellate specialists to argue whether the Court of Appeals got this right on narrow procedural grounds. But as discussed above, the Texas Supreme Court has specifically said the requirements of the non-compete statute apply to a non-solicitation agreement. So, to the extent that Impact Floors says otherwise, it is wrong.
But there is another way to get to the same result. Despite the plain language of the statute requiring reasonable limitations as to “geographical area,” some Texas courts have said that a limitation on the scope of a non-compete—such as limiting it to the employee’s clients—can be used in lieu of a geographic limitation.
So if you’re the lawyer representing the employee, don’t get too excited if the non-solicitation clause has no geographic limitation. It might still be enforceable as written. And even if it’s unenforceable as written, the trial court judge could still grant a temporary injunction enforcing it to a more limited extent.
But don’t let the employer’s lawyer get away with arguing that a non-solicitation clause isn’t a non-compete. That’s just incorrect.
*These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.
 Tex. Bus. & Com. Code § 15.05.
 See, e.g., Rimkus Consulting Group, Inc. v. Cammarata, 255 F.R.D. 417, 438-39 (S.D. Tex. 2008) (stating that a “nonsolicitation covenant is also a restraint on trade and competition and must meet the criteria of section 15.50 of the Texas Business and Commerce Code to be enforceable”).
 The Court of Appeals reasoned that the employee complained on appeal only about the non-compete provision, but that the temporary injunction did not enforce the non-compete provision, so therefore the employee’s complaint presented nothing for appellate review. Id.
 See Gallagher Healthcare Ins. Servs. v. Vogelsang, 312 S.W.3d 640, 654-55 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (“A number of courts have held that a non-compete covenant that is limited to the employee’s clients is a reasonable alternative to a geographical limit”); M-I LLC v. Stelly, 733 F.Supp.2d 759, 799-800 (S.D. Tex. 2010) (taking “holistic” approach and holding that absence of geographic restriction did not render non-compete unenforceable where time period was only six months, employee held upper management position, and employee had access to company’s trade secrets).
Fivers, did you know I have a YouTube channel? It’s called That Non-Compete Lawyer. I named it that because I’m a lawyer, and . . . ok, you get it.
I thought about naming it That Houston Lawyer Who Does a Lot of Different Kinds of Business Litigation but in Recent Years Mainly Litigation Involving Departing Employee Issues Like Non-Competes and Trade Secrets*. But that just didn’t have the same ring to it.
Anyway, I’ve had this YouTube channel for a while. It’s the home for my series of videos explaining non-compete issues in a way that lawyers and other humans can both easily understand.
It’s also the hub for my series of “Top 5 Tuesday” videos. I consider them both insightful and hilarious, providing useful legal information in an entertaining way, while critics have expressed amazement at how they manage to be dull and frivolous at the same time.
But now I’ve launched something even more amazing: Essentials of Texas Non-Compete Litigation. It’s a 30-minute video course in 15 installments. As you math majors will deduce, that’s an average of two minutes per installment.
Love it? Hate it? Is there something essential I left out? Did I get anything wrong? Was there anything I could have cut? If so, I’m pretty sure there is a way to communicate that to me through YouTube’s popular platform. Or if you’re not that tech-savvy, you can just text me on your flip phone.
Is Essentials of Non-Compete Litigation approved for CLE credit in Texas? No, but I’ll look into that.
Is it better to watch one episode at a time, or to binge-watch the whole series in one weekend? I leave this to your discretion.
Can one Texas trial lawyer cover the essentials of Texas non-compete litigation in just 30 minutes? There’s only one way to find out.
Is there a GoFundMe campaign to get you better lighting and sound? Not yet, but I like the way you think.
Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. He hopes to continue litigating even after becoming a viral YouTube sensation.
It’s my anniversary. Two years ago today I launched this blog with What a Litigator Looks For in the Typical Texas Non-Compete. I thought it best to start with a topic I know. I outlined the five things I look for to determine if a non-compete is enforceable under Texas law.
That post has held up pretty well. Since then, I’ve seen plenty more non-competes. Texas non-compete law hasn’t fundamentally changed, and I still look for those five things. So, if you want an intro to Texas non-compete law, that post is still a good place to start. Or you can watch a video version here.
But two more years have taught me there is a simpler question to ask when a client brings me a non-compete. As a general rule, you can boil down the practical effect of Texas non-compete law to just seven words: you can’t take your customers with you.
What do I mean? If you’re a sales person who has a non-compete and relationships with customers—the most common situation—it is likely a judge will order you not to do business with your customers from your previous company. But the judge shouldn’t completely bar you from working for a competitor.
It’s just a rule of thumb because like most legal rules, it has exceptions, and the whole truth is more complicated. Still, experience has taught me that nine times out of ten, my First Law will hold true.
This means if you’re an employer trying to stop an employee from violating a non-compete, you can probably prevent the employee from taking her customers with her, but you probably can’t do more than that.
If that’s all you need to know, you can stop here. If you want to understand why, read on.
Here’s how I get there. The Texas non-compete statute has two requirements: (1) a non-compete must be “ancillary to an otherwise enforceable agreement,” and (2) it must be reasonable.
Employers usually meet the first requirement by (a) expressly stating in the non-compete that they will give the employee confidential information, and (b) actually giving the employee confidential information. A Texas Supreme Court case called Sheshunoff clarified that this will do the trick.
This is where the first big exception comes in. You will sometimes run across a non-compete that does not expressly promise to give the employee confidential information. Usually when you see that it’s either a really old non-compete, or a non-compete drafted for a multi-state company without Texas in mind.
If there is no express promise, you have to look at whether there was an implied promise to provide confidential information. A case called Mann Frankfort said the promise is implied if the nature of the employee’s work necessarily involves providing confidential information. That can be a fact-intensive issue.
Most employers avoid this detour by including an express promise to provide confidential information in the non-compete. Then the second big exception comes into play: did the employer actually provide confidential information to the employee?
I have had cases where there was a genuine dispute about whether the information was really confidential. You are more likely to see this in situations where an employee already had a book of business when he joined the company, or where sales people are entirely responsible for generating their own leads and customers. If the employer didn’t provide confidential information, the non-compete is unenforceable.
But most of the time, it’s pretty easy for the company to show that it provided some confidential information to the employee.
Now that we’ve cleared those possible exceptions out of the way, it’s time to turn to reasonableness.
Like most states, Texas requires a non-compete to be reasonable in time period, geographic area, and scope of activity restrained.
The good news for employees is that there is almost always at least a decent argument that some aspect of the non-compete is unreasonably broad. Especially the “scope of activity” part. While most Texas lawyers are pretty good about including a reasonable time period and geographic limitation, Texas non-competes are often too broad in the scope of activity they restrict.
Maybe this is because the scope of activity limitation is largely defined by the case law, so a lawyer who only reads the statute won’t get the whole picture. The case law says that an “industry-wide exclusion”—a restriction that prevents the employee for working in the same industry in any way—is too broad.
That’s because a non-compete should be limited to protecting the employer’s goodwill, i.e. its relationships with existing customers. The simplest way to do this is to say–usually in one really long sentence with fancier words–that the employee can’t take her customers with her. That’s a reasonable scope (generally). On the other hand, a non-compete that bars the employee from working for a competitor in any way is usually too broad and therefore unenforceable as written.
But employees shouldn’t get too excited. There is also good news for the employer.
First, note I said unenforceable “as written.” The non-compete statute says that if the non-compete is too broad, the judge must reform it—i.e., rewrite it—to the extent necessary to make it reasonable.
Now you can see Wolfe’s First Law coming into focus. When you put all this together, you get two likely scenarios. If the non-compete is reasonable in scope because it is limited to preventing the employee from taking her customers with her, then the judge is likely to grant a temporary injunction that enforces the non-compete as written. If the non-compete is unreasonable in scope because it is not so limited, the judge is likely to limit the injunction to a reasonable scope, i.e. preventing the employee from taking her customers with her.
In either case, the effect is the same. And Wolfe’s First Law of Texas Non-Compete Litigation holds true.
Again, there are exceptions. For example, some judges take the “irreparable injury” rule seriously. That rule says that a court should not grant an injunction if damages would be adequate to compensate the company for the employee’s violation of the non-compete.
My personal view—perhaps a post for another day—is that courts should apply this requirement more strictly. In most cases damages would be adequate to compensate the employer for any lost customers.
But most judges are not so fastidious about the irreparable injury rule. If the judge thinks the employee is violating the non-compete by steering competitors to the employee’s new company, a temporary injunction is likely.
Of course, a temporary injunction is not the end of the story. It is temporary, after all.
Still, in most cases a temporary injunction enforcing the non-compete might as well be a permanent injunction. Why? Remember that a non-compete must be reasonably limited in time. Time periods of three years or longer have sometimes been held reasonable, but most non-competes are limited to one or two years.
How long do you think it usually takes for a case to get to trial? (Hint: at least one or two years.) That means that in many cases, the non-compete will expire before the case goes to trial, or around that time. That’s why I say a temporary injunction might as well be a permanent injunction.
So maybe we should modify Wolfe’s First Law to say this: you can’t take your customers with you, until a year or two after you leave.
But that just doesn’t have the same ring to it.
*Update: There is an important exception: cases where I represent the defendants. But seriously, what if the employee isn’t “taking” the customers, but the customers want to follow the employee without any solicitation by the employee? That’s a different question.
Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Someday he will come up with a “Wolfe’s Second Law” for something.
 Reformation is a remedy that typically would not be granted until a final judgment after trial. There is some legal question about whether the judge at a temporary injunction hearing should (1) reform the non-compete as a temporary remedy and enter a temporary injunction enforcing the reformed non-compete, or (2) simply enter a temporary injunction that only partially enforces the non-compete to a reasonable extent. The distinction seems largely academic.
Do you have a college degree in restaurant and hotel management? Have I got a deal for you.
Work as an assistant manager at Buc-ee’s, the well-known Texas highway stop with the clean restrooms, massive selection of snacks, and funny billboards. On top of a weekly salary of $862.75, you will get a monthly bonus, I mean, “retention payment,” of 1.2652% of the store’s monthly net profit.
Naturally, your employment will be at-will, meaning Buc-ee’s can fire you at any time for any reason, or for no reason. That’s ok, because you can also quit for any reason, or for no reason.
But here’s the catch. If you quit or get fired in less than four years, or if you don’t give Buc-ee’s written notice at least 6 months before quitting, you have to pay back all of the retention payments you received, plus interest and attorneys’ fees.
In other words, you can check out any time you like, but you can never leave.
That was the basic deal in Rieves v. Buc-ee’s, a case decided by the Houston Court of Appeals (14th District). Rieves, the employee, received about $67,000 in retention payments, paying federal income taxes on them, but quit the job three years in. Buc-ee’s sued her to recover the $67,000 plus interest and attorneys’ fees.
That doesn’t sound fair, you may be thinking, but this is Texas, and a deal’s a deal, right?
Well, yes, “that’s not fair” is usually not a defense to enforcement of a contract, and “unfairness” is not an exception to the at-will employment doctrine.
But it’s not just a question of enforcing the parties’ contract. The public’s interest in free competition is also at stake. That’s why Texas has a statute that says every contract in restraint of trade or commerce is illegal. The statute has an exception for non-competes, but the non-compete has to be reasonable in scope.
So, Rieves argued that the contract’s requirement to pay back the retention payments was an unenforceable restraint of trade, and the Houston Court of Appeals agreed.
Under Texas case law, the court said, limitations on employee mobility are unenforceable unless they fall within the statutory exception for non-competes. This rule applies not only to provisions that expressly limit employee mobility, but also to damages clauses that impose a “severe economic penalty” on a departing employee. Because the contract imposed a severe economic penalty on Rieves for exercising her right to quit, the court reasoned that the contract was unlawful unless it met the reasonableness requirements for non-competes.
The problem for Buc-ee’s? The contract had no limits on the employee’s repayment obligation based on whether her new employment involved competitive activities or was located within certain areas. Not only that, the contract gave Buc-ee’s the right to enforce the repayment provision even if, for example, Buc-ee’s fired the employee without cause on the last day of the four-year period, or if the employee quit to take a noncompeting job, or no job at all.
This was just too much, even for the relatively conservative 14th Court of Appeals.
“These provisions go far beyond protecting any legitimate competitive interest of Buc-ee’s,” Justice Busby wrote for the court, “impose significant hardship on Rieves by clawing back substantial compensation already paid to her and on which she had paid taxes, and injure the public by limiting choice and mobility of skilled employees.” The court therefore rendered judgment that the repayment provision of the contract was unenforceable.
That sounds like a fairly common-sense application of Texas law, right?
What about ExxonMobil v. Drennen?
But those of you who follow Texas non-compete law may be thinking, what about Drennen?
Exxon Mobil v. Drennen was a Texas Supreme Court case decided in 2014. Technically, it addressed a narrow issue only a lawyer could love: choice of law. The contract at issue in Drennen required an executive to forfeit stock options if he went to work for a competitor. New York law allows that sort of thing, and the legal issue presented was whether the Texas court should apply New York law or Texas law.
I won’t get down in the weeds of the choice of law analysis, but the key was that one step was to ask whether Texas has any “fundamental policy” against this kind of forfeiture provision.
Some of you may recall a certain statute that says something about, what was it, restraints of trade or commerce being unlawful? That kind of sounds like a “fundamental policy” to me.
But the Texas Supreme Court didn’t see it that way. It held in Drennen that there was no fundamental Texas policy that would bar the forfeiture clause, and that cleared the way for New York law to apply.
As explained here, I thought Drennen got it wrong on this point. In my view, Texas courts should take the legislature’s ban on restraints of trade more seriously. But of course I don’t get to make the rules. And while bloggers and pundits are free to criticize, the Texas Courts of Appeals have to follow what the Texas Supreme Court says.
So if Drennen said the forfeiture of employee benefits does not violate Texas public policy, why didn’t that control the outcome in the Buc-ee’s case?
The Buc-ee’s court found that Drennen did not apply. First, the type of compensation at issue was different. In Drennen, it was forfeiture of future unvested stock options, while in Buc-ee’s it was money already paid to the employee, on which she had already paid income taxes.
Second, the Buc-ee’s contract was different because, unlike the stock option provision in Drennen, it did not necessarily reward the employee for her loyalty. The contract required the employee to pay back a substantial part of her compensation even if Buc-ee’s fired her, and the longer she worked at Buc-ee’s, the larger the penalty if she decided to quit.
The Buc-ee’s decision shows that some Texas courts still take the legislature seriously when it says that restraints of trade are unlawful. It’s an important decision, because it restores some balance to the basic social contract that Texas law provides to businesses and employees.
The at-will employment doctrine and the ban on restraints of trade are two sides of this coin. What’s in it for business is they can hire and fire at will, with only some narrow exceptions (like unlawful discrimination).
The at-will employment doctrine is widely known but not fully appreciated. Everybody knows that employers can fire employees at will, yet with most people that knowledge really hasn’t sunk in. In the back of their minds, employees still seem to feel that employers can’t fire them for a bad reason.
But they can, and that’s a big deal. I would even say the at-will employment doctrine is the most serious source of injustice in the workplace in America.
Think about it. At-will employment means you can slave away for the same company for twenty years and get fired because the owner wanted to make room for his son who just got out of college and needs a job. It’s just not fair!
Yet I fully support the at-will employment doctrine. While at-will employment is a source of great injustice on the “micro” level, we accept it as a necessity for its “macro” benefits, which fall into two categories.
Second, we accept at-will employment for its economic benefits. The ability to hire and fire freely boosts overall economic growth and employment, benefitting everyone. If employers could only fire for good cause, think of how reluctant they would be to hire in the first place. At-will employment also encourages employee mobility, which increases competition.
But this gets to the other side of the deal: at-will employment has to be a two-way street. Just as employers can fire for any reason, or for no reason, employees have to be free to say “take this job and shove it.” Not only that, employees must be able to leave and work for a competitor (unless there is a reasonably limited non-compete). That’s the balance that makes at-will employment work.
The basic problem in Buc-ee’s was that the employer tried to upset this balance. Buc-ee’s wanted to have its beef jerky and eat it too: we can fire you any time for any reason, but we’re also going to make it cost-prohibitive for you to decide to leave.
This was just too much for the Houston Court of Appeals. You can’t always get what you want.
Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. As a litigator he drives around Texas a lot and loves stopping at Buc-ee’s.
 Rieves v. Buc-ee’s Ltd., 532 S.W.3d 845 (Tex. App.—Houston [14th Dist.] 2017, no pet.).
 Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319 (Tex. 2014).
 This is not to downplay harassment and discrimination, which are certainly real problems.
COMES NOW PLAINTIFF . . .
WHEREFORE, PREMISES CONSIDERED, PLAINTIFF PRAYS . . .
And yes, they are usually in ALL CAPS.
You may have wondered if there is some legal purpose to these formalisms. The answer is no. Leaving these traditional incantations out of a court document would have zero legal effect. They are no more necessary than drafting a court document in Papyrus font.
So why do lawyers use them?
The most basic explanation is inertia. Lawyer like to use forms, forms often contain phrases like this, and lawyers don’t bother to change them.
I think insecurity is the main reason lawyers use these archaic phrases. The lawyer feels a need to “sound like a lawyer,” to show people “hey, I went to law school for three years and passed the bar.” The lawyer does not feel secure enough that the substance of his writing will accomplish this.
At a minimum, a document encrusted with these legal barnacles shows that the lawyer is not serious about good contemporary legal writing.
A couple caveats are appropriate. First, everyone has certain formal phrases they like to use in legal documents. I admit a fondness for putting “respectfully submitted” before the signature block, even though it has no legal effect and isn’t required. I see this as the equivalent of good manners, like saying “please” and “thank you” in polite conversation.
Second, there are certain ceremonial formalities that are worth observing for the sake of tradition and decorum, like saying “May it Please the Court” at the start of oral argument in an appellate court. We say things like this for the same reason that judges wear robes.
But many lawyers overdo the formalisms in legal documents, and for no good reason. If you leave out “TO THE HONORABLE JUDGE OF SAID COURT,” do you really think the judge is going to look at the document and say, “this lawyer doesn’t think I’m honorable, how dare he”?
And most authorities on contemporary legal writing agree that throat-clearing phrases like this are not only unnecessary, they are undesirable. I like what Wayne Schiess had to say about this here (and not just because he happened to be my first-year legal writing instructor at the University of Texas).
In short, if you care about good legal writing, eliminate the unnecessary ceremonial language, or keep it to a minimum.
But this gets to a more substantive question: what is it that makes good legal writing good? More pointedly, what makes bad legal writing bad?
Oh, let me count the ways. Schiess is helpful on this point as well. In this blog post he identifies some common flaws in weak legal writing. The main thing these flaws have in common is trying to sound more formal and “legal” than necessary.
This kind of legal writing has led to a reaction known as the “plain language” or “plain English” movement. Some judges, practitioners, and academics have advocated and practiced eliminating—or at least reducing—the “legalese” that plagues so much legal writing.
Overall, I’m on board with the plain language movement, which has several benefits and very little downside.
There are, of course, exceptions. When lawyers are writing to other lawyers, especially in their practice area, there are certain terms of art that would be awkward to translate into plain language. It would be silly to change “res judicata bars Plaintiff’s claims” to “the thing-already-decided doctrine bars Plaintiff’s claims.” Slavish devotion to “plain language” would make no more sense than blindly copying outmoded language from old forms.
And there is an even more important exception: when changing or deleting formal language would have a substantive legal effect. For example, a final judgment from a court typically ends with “All relief not expressly granted is denied.” That phrase has—or at least potentially has—a specific intended legal effect. It’s not merely an empty formalism, so you wouldn’t want to delete it just because it strikes you as unnecessary boilerplate.
This gets to the real test for plain language as applied to contracts: What difference does it make if a clause is written if legalese as long as it has the intended legal effect? Put another way, an “old-school” transactional lawyer might object that shifting to “plain language” is unnecessary, and even undesirable, because it places style over substance.
Point taken. But as a trial lawyer, I know that both substance and style matter. The style of a contract matters because that contract is going to be Exhibit 1 in a lawsuit, and you’re going to have to explain and defend the contract to a broader constituency: the witnesses, the judge, the jury, and even the opposing party.
I’ll use a non-compete agreement as an example, because it’s what I know best. I’ve seen a lot of non-competes, and most read like they were written with no regard for how they will be viewed in a subsequent lawsuit. Show me a lawyer who drafts a non-compete in impenetrable legalese, and I’ll show you a lawyer who never had to pin down an evasive witness about that non-compete in a deposition.
Somehow lawyers started to think that a non-compete is only enforceable if it’s contained in one long sentence in a block paragraph in small print that takes up at least half a page. And every key term—like “confidential information”—is a laundry list of “including-but-not-limited to’s,” rather than a single common-sense word.
But again, what does it matter, as long as the non-compete is legally effective?
It matters because in a lawsuit a lawyer will have to persuade a judge—and maybe even a jury—that the non-compete is reasonable and should be enforced. The plainer the meaning, the easier it will be to persuade.
A non-compete written in dense legalese, on the other hand, sends a not-entirely-subliminal message: this is one-sided boilerplate the employer’s lawyer wrote to screw the employee.
Ok, plain language is better in theory, you say. But is it possible? Can an effective non-compete be written in plain language?
There’s only one way to find out. As an experiment, I give you . . . the Plain-Language Non-Compete.
***MASSIVE LEGAL DISCLAIMER*** I offer the Plain-Language Non-Compete only for the purpose of discussion. I am not advising anyone to use it. And if you’re not a lawyer, don’t even think about using the Plain-Language Non-Compete without advice from a qualified lawyer.
Some of you will think the Plain-Language Non-Compete doesn’t sound “legal” enough. If so, please tell me which provisions you think are too “plain English” to be legally effective, and why.
Some of you may go the other way. You may think I haven’t gone “plain” enough. And I admit, even the Plain-Language Non-Compete has some technical clauses only a lawyer could love. So, if there is a section you think is unnecessary or would be worded more plainly, I’m all ears.
And if you want to understand the substance of what I have included and why, a good place to start is my very first blog post: What a Litigator Looks for in the Typical Texas Non-Compete.
WHEREFORE, PREMISES CONSIDERED, Five Minute Law respectfully submits to the Honorable Readers of Said Blog: the Plain-Language Employment Agreement With Non-Compete.
*Update: I have updated the form a couple times since the original post. Inter alia (how’s that for a formalism?), I have followed Bryan Garner’s formatting advice by using hanging indents for numbered lists. I used 12-point Palatino font, but there is probably a way to change that if you want.

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