Texas Supreme Court Makes It Easier To Enforce Noncompete Agreements
On April 17, 2009, the Texas Supreme Court removed a hurdle to the enforcement of noncompete agreements and clarified what is required for a valid agreement in the state of Texas.
In Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 2009 WL 1028051 (Tex. 2009), the court addressed the question of whether a noncompete in an at-will employment relationship is enforceable when the employee expressly promises to not disclose confidential information but the employer makes no express return promise to actually provide confidential information. The court held that, as long as the employment for which the employee is hired will reasonably require the company to provide confidential information to the employee for the accomplishment of the contemplated job duties, it is reasonable to imply a promise to make such a disclosure in the covenant not to compete. The court made clear that this holding is contingent upon other requirements of the Texas Covenant Not To Compete Act being satisfied.
This case addresses the lingering question of whether the lack of an affirmative promise by an employer to provide confidential information to an at-will employee voids a noncompete agreement for lack of consideration because the employer could theoretically terminate the employee at any time, without ever providing confidential information. This decision does away with this argument and allows enforcement of the noncompete agreement as long as the employer actually provides confidential information to the employee during employment.
This decision is the second opinion from the Texas Supreme Court in recent years that makes it easier for employers to enforce noncompetes in the state of Texas. It appears that the Texas Supreme Court is signaling to lower courts that future cases should focus more on the reasonableness of the noncompete agreement, and less on hypertechnical legal arguments. Nonetheless, clients using noncompete agreements in the State of Texas should annually review their agreements to ensure they are in compliance with this ever-changing area of law.
