Labor & Employment Law

Texas Supreme Court Makes Agreements Easier to Enforce

By Robert Wood

The Texas Supreme Court recently made it even easier to enforce noncompete agreements.  Ever since the court's opinion in the Sheshunoff case, it has been an open question whether, to be enforceable, a noncompete agreement must contain an explicit promise by the employer to provide confidential information to the employee.  In Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 52 Tex. Sup. J. 616 (Tex. April 17, 2009), the court answered this question, and held that the employer's promise to do so can sometimes be implied.

In Mann, the court held that even if the noncompete agreement does not contain an explicit promise by the employer to provide confidential information, if the employee's job will reasonably require the employer to do so, then an implied promise to provide confidential information exists.  This implied promise will provide the consideration necessary to make the noncompete agreement enforceable.

This is an important holding, obviously, because it means that some noncompete agreements that were previously thought to be enforceable, now arguably are.  Of course, the employee bound by the non-compete agreement will still be able to challenge whether the information given to him was truly confidential, and he also may be able to contend that the scope of the restriction is unreasonable.

Nevertheless, the combined effect of Sheshunoff and Mann suggests that the supreme court may be tiring of 'technical' arguments over the enforceability of noncompete agreements.  Rather than constantly focusing on the precise wording of the agreements, and on when the information which arguably justifies the restrictions was conveyed to the employee, the court may be signaling a desire to focus on what it considers to be the true substantive considerations:  whether confidential information was in fact conveyed and, if it was, whether the information justifies the restrictions contained in the agreement.

For employers whose current or former employees are bound by noncompete agreements(particularly if the agreements were signed years ago), this will make enforceable some agreements that otherwise would be unenforceable.

Full post as published by Texas Non-Compete Law Blog on May 16, 2009 (boomark / email).