February 2015

It’s been 3 and a half  years since the Marsh opinion that redefined what could constitute consideration for a Texas non-compete and courts have bee relatively quiet on non-competes since then.   That’s not surprising from the Texas Supreme Court as Marsh was the third of a trilogy of opinions dealing with the subject.  Appellate courts have continued to address the enforceability of non-competes from time to time but there have not been any cutting edge opinions.

Frankly, I thought we would see cases where employers were using signing bonuses, stock options (like Marsh), or other financial incentives to support non-competes.  Those types of things may be happening out in the field but have not made their way to appellate courts, yet.  Employers should definitively be considering them.  From an anecdotal standpoint (my view from the courthouse and discussions with employers/employees) it appears that folks in Texas are more resigned to the fact that the non-compete that was signed at the outset of employment is enforceable but the new employer or former employee is willing to take the risk of breaking it.

My high level thoughts on non-competes haven’t changed and were most recently covered in a Texas Lawyer article last summer that you can read here.  Some highpoints:

1. The Texas non-compete statute has not changed in years – follow it;
2. Make sure the non-compete is reasonable in time and what it covers;
3. Remember that at some point the former employee is going to be able to compete;
4. If the employer is going to put in the time to draft a non-compete then enforce it;
5. Think about items such as jury trial waivers, forum provisions, choice-of-law provisions, and even arbitration;
6. Courts like to enforce non-solicits over non-competes because they are “fairer” – you’re not putting the employee out of business, but they can’t contact your customers; and
7. If you are an employee remember you can never “unsign” a non-compete.

We’ll continue to monitor the non-compete front here in Texas.