Labor & Employment Law

Denton Texas Lawyer. Texas Noncompete Agreements Attorney.

By Robert Wood

To be enforceable in Texas, non-compete agreements must be supported by adequate consideration.  In the employment context, the only kind of consideration that the courts have consistently held to be adequate is the employer's providing of confidential information to the employee.  This is not to say that financial consideration—such as the providing of company stock—can never be sufficient.  However, generally speaking, for a non-compete agreement to be enforceable in the employment context, the employer must provide confidential information to the employee.  This has been the case in Texas for many years.

Until last year, it had also been true in Texas that a non-compete agreement, to be enforceable, had to be worded in a certain way.  Specifically, the agreement had to contain an affirmative promise by the employer to provide confidential information to the employee.  Thus, in some cases, Texas courts held that covenants not to compete were unenforceable because they did not contain a promise by the employer to provide confidential information to the employee (and this was so even if the employee did, in fact, receive confidential information from the employer).

This all changed last year.  In April 2009, in the Mann Frankfort case, the Texas Supreme Court held that a non-compete agreement could be enforceable even if it did not contain an explicit promise by the employer to provide confidential information.  The court held that, in some situations, the employer's promise to provide confidential information could be 'implied.'  The court noted:  'When the nature of the work the employee is hired to perform requires confidential information to be provided for the work to be performed by the employee, the employer impliedly promises confidential information will be provided.'

OBSERVATION:

The effect of the Mann Frankfort decision was to make enforceable many non-compete agreements in Texas that otherwise would have been unenforceable.  Now, in some circumstances, a court will see in a non-compete agreement an implied promise to provide confidential information, even though the agreement does not contain an express promise.  The key inquiry is whether the employee's job duties are such that the conveying of confidential information would be required.  If the answer is yes, and if confidential information is in fact imparted to the employee, then the agreement may be enforceable.

Full post as published by Texas Non-Compete Law Blog on April 16, 2010 (boomark / email).