April 2013

One of my favorite new things to listen to is the Fairly Competing podcast put on by Ken Vanko, Russell Beck, and John Marsh. The podcast addresses a number of issues related to non-competes and trade secrets and recently discussed a court’s preference to enforce a non-solicit over a non-compete. The basic premise is that courts and for that matter juries are more likely to enforce a non-solicit because it prevents the former employee from targeting customers as opposed to putting the employee out of work.

Under Texas law there is no real legal distinction in terms of enforceability. Both a non-compete an non-solicit must satisfy the Texas non-compete statute meaning the agreement has to be reasonable and ancillary to an otherwise enforceable agreement, among other things. That said, there is a real psychological value to being able to tell the judge that you want the former employee to stay away from company customers as opposed to putting he or she out of work.

It is always a very effective argument for the employee to say that they are just trying to make a living and depending upon their circumstances may have been in the same line of work for many years with multiple employers. Of course these are not always the facts and there are many instances where a non-compete makes sense.

Arguing simply for a non-solicit removes the “out of work" defense and restricts the covenant to keeping the former employee from taking current customers. Just from a psychological perspective, courts are more likely to embrace these because they seem fair and equitable.  Most folks can identify with wanting to restrict access to company customers after the employee leaves the company.

One of the recommendations made in the podcast is to seek injunctive relief based both on the non-compete and non-solicit. If the lawyer is unsuccessful with the non-compete arguments he or she can fall back to the non-solicit agreement.

As with any case, your mileage will vary based upon the facts and circumstances. If there is a blatant violation of both agreements the court should enforce both, but this is not always the case. Employers should consider using both types of post-employment covenants but seriously consider whether they ask the judge to enforce both.  A judge considering a temporary restraining order or injunction has wide latitude and the employer who appears to be fair and not overreaching has a better chance of success.