December 2012

                         

At the end of each year I try to address and take inventory of what has occurred in post-employment covenant litigation in the State of Texas.  After several years of dramatic Texas Supreme Court opinions on the subject of non-competes, 2012 was a quiet year.  We heard nothing from the Texas Supreme Court on the issue and very little from the lower courts construing the 2011 Marsh opinion.  This is not surprising.  It will take some additional time for cases to wind themselves through our lower courts to get some clarity on Marsh and give us a better flavor for where Texas jurors prudence on non-competes stands. Regardless, those who are attempting to enforce non-competes are in a better position in 2012 than they were in 2010.

What have I seen from the trenches? The extensive use of non-solicitation and non-compete agreements in a wide range of industries.  This includes recruiters, bakers, furniture sales persons, doctors, and about any other industry that comes to mind.  The reality is business owners will use non-competes even if they are not enforceable simply to make employees rethink leaving or going out on their own. As a result, the mere threat of a non-compete is very effective even if the non-compete or the non-solicitous is ultimately unenforceable. 

It is the rare circumstance where a lawyer should tell their client employee that a court will not enforce a non-compete. Because enforcement is usually done through an injunction, the court is proceeding in equity and can usually fashion whatever relief it deems fair.  For this reason, mere inclusion of a non-compete should give any former employee or potential new employer pause. This type of litigation can be very expensive and very quick.  Employers should continue to enforce non-competes uniformly and design an agreement that will be enforced by courts.

So what do I expect for 2013?  More of the same.  Employers are going to continue to use these kind of covenants and former employees will try to get out of them.  Hopefully some lower Texas courts of appeal will provided further guidance on non-compete enforcement.

An issue that employers should be considering is how they want to enforce their agreements.  Consideration of jury trial waivers and arbitration is appropriate.  To often, employers spend more time thinking about terms and less time thinking about enforcement.  If you are going to spend the time and money to draft these types of agreement be ready to enforce them.

Best of luck in 2013.