Opinion ID: 894789
Heading Depth: 2
Heading Rank: 1

Heading: At the Time the Agreement Is Made. 1. Light's Analysis

Text: In Light, we analyzed the requirements for enforceability of a covenant not to compete under section 15.50. In that case, an employee (Light) who had held her job since 1985 signed an agreement in 1987 containing a covenant not to compete. 883 S.W.2d at 643. The agreement stated that the employer agrees to provide the [employee] initial and on-going specialized training necessary to sell the mobile radio communications services [employer] offers. Id. at 646 n. 8. It provided that employment is terminable at the will of either [employee] or [employer]. Id. at 645-46 n. 8. We held that otherwise enforceable agreements under section 15.50(a) can emanate from at-will employment so long as the consideration for any promise is not illusory. Id. at 645. We concluded that the agreement contained, in addition to the covenant not to compete, three non-illusory promises: (1) the employer's promise to provide initial specialized training; (2) the employee's promise to provide fourteen days' notice prior to termination; and (3) the employee's promise to provide an inventory upon termination. Id. at 645-46. We construed the employer obligation to provide initial training as not depending on whether the employee was still employed: Even if Light had resigned or been fired after this agreement was executed, United would still have been required to provide the initial training. Id. at 646. We held that these promises were not sufficient to make the covenant enforceable under the Act. We held that section 15.50 requires the covenant to be ancillary to or part of the otherwise enforceable agreement, and that to meet this requirement, two conditions must be met: (1) the consideration given by the employer in the otherwise enforceable agreement must give rise to the employer's interest in restraining the employee from competing; and (2) the covenant must be designed to enforce the employee's consideration or return promise in the otherwise enforceable agreement. Id. at 647. We concluded that the non-illusory promises in the agreement did not satisfy these requirements because the covenant not to compete was not designed to enforce the employee's promises to give notice and provide an inventory. Id. at 647 & n. 15. We recognized that the agreement must give rise to an interest worthy of protection by a covenant not to compete, id. at 647 (quoting DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 682 (Tex.1990)), and that business goodwill and confidential or proprietary information are examples of such worthy interests, id. We stated that the employer's promise to train the employee might involve confidential or proprietary information, id., and that a reciprocal promise by the employee not to disclose such confidential information would meet the requirement that the covenant be designed to enforce the employee's consideration provided in the agreement, id. at 647 & n. 14. However, the covenant in Light failed because Light did not promise in the otherwise enforceable agreement to not disclose any of the confidential or proprietary information given to her by her employer. Id. at 647-48. We do not disturb the holding in Light. The covenant in that case was part of an agreement that contained mutual non-illusory promises and was an otherwise enforceable agreement. Id. at 646. The covenant was not enforceable, however, because it was not designed to enforce any of Light's return promises in the otherwise enforceable agreement. Id. at 647. Unlike Johnson in the pending case, Light made no promise not to disclose confidential information. Under Light, for a covenant to be ancillary to or part of an enforceable agreement under section 15.50, (1) the consideration given by the employer in the otherwise enforceable agreement must give rise to the employer's interest in restraining the employee from competing; and (2) the covenant must be designed to enforce the employee's consideration or return promise in the otherwise enforceable agreement. Id. at 647. In the pending case, ASM promised to disclose confidential information and to provide specialized training under the Agreement, and Johnson promised not to disclose confidential information. The covenant was ancillary to or part of the agreement under the two requirements of Light quoted immediately above. However, under other language in Light, the Agreement was not enforceable at the time it was made. In footnote six of Light, we discussed section 15.50's requirement that the covenant be ancillary or part of an otherwise enforceable agreement at the time the agreement is made:  If only one promise is illusory, a unilateral contract can still be formed; the non-illusory promise can serve as an offer, which the promisor who made the illusory promise can accept by performance. For example, suppose an employee promises not to disclose an employer's trade secrets and other proprietary information, if the employer gives the employee such specialized training and information during the employee's employment. If the employee merely sought a promise to perform from the employer, such a promise would be illusory because the employer could fire the employee and escape the obligation to perform. If, however, the employer accepts the employee's offer by performing, in other words by providing the training, a unilateral contract is created in which the employee is now bound by the employee's promise. The fact that the employer was not bound to perform because he could have fired the employee is irrelevant; if he has performed, he has accepted the employee's offer and created a binding unilateral contract. . . . Such a unilateral contract existed between Light and United as to Light's compensation. But such unilateral contract, since it could be accepted only by future performance, could not support a covenant not to compete inasmuch as it was not an otherwise enforceable agreement at the time the agreement is made as required by § 15.50. Id. at 645 n. 6 (citations omitted). In the pending case, the court of appeals correctly held that under Light's footnote six, the agreement was illusory insofar as it required ASM to provide confidential information and specialized training. Since ASM could fire Johnson after the agreement was signed, and before it provided any confidential information or specialized training, we have exactly the situation hypothesized in footnote six. Unlike the agreement in Light, the agreement in the pending case did not oblige ASM to provide initial training whether or not Johnson was still employed by ASM. The agreement made no such promise, but instead stated that ASM agreed to provide training and access to confidential information [t]o assist Employee in the performance of his/her duties. There was no promise to provide such training and access after the employee had been terminated. ASM argues that the contract was not illusory and was not an at-will contract at all because of the notice provisions in Agreement. Under the notice provision applicable to the employer, ASM could terminate Johnson immediately and without notice so long as it paid a specified sum to Johnson. The promises to provide confidential information and training to Johnson were therefore illusory at the time the agreement was executed. Under Light, the consideration given by the employer in the otherwise enforceable agreement must give rise to the employer's interest in restraining the employee from competing, id. at 647, and if this particular consideration is never provided by the employer, the covenant not to compete cannot be enforced. Absent such consideration, the covenant is not ancillary to or part of the otherwise enforceable agreement under the Act as interpreted by Light. To hold otherwise would mean that an employer could enforce a covenant merely by promising to pay a sum of money to the employee in the agreement, a result inconsistent with Light's requirements that the covenant must give rise to the employer's interest in restraining the employee from competing and the covenant must be designed to enforce the employee's consideration or return promise. A covenant not to compete is not designed to enforce a notice provision. Id. at 647 n. 15. The court of appeals correctly held that under Light, ASM's non-illusory promise to give at least two weeks' notice before terminating Johnson does not give rise to its interest in restraining Johnson from competing. 124 S.W.3d at 688.