Labor & Employment Law

Does Constructive Discharge Affect Enforceability of Texas Noncompete Agreement?

By Robert Wood

In a recent case in a federal district court in Texas, the defendants--individuals who had signed non-compete agreements with their previous employer--contended that their agreements should not be enforceable because they were "constructively discharged" (i.e., forced to resign). 

The federal district court rejected this contention.  In doing so, the court noted that "termination of at-will employment does not invalidate a restrictive covenant and it does not give rise to a claim for constructive discharge."   The court then analyzed the facts proffered by the defendants in support of their constructive discharge claim (e.g., that their former employer had been fined by the Justice Department) and found them wanting.  The court stated that this "in no way indicates that Defendants' work conditions were so altered that a reasonable person would have felt compelled to resign."

OBSERVATION:

Although the district court rejected the defendants' constructive discharge contention in this case, it cannot be said with certainty that such an argument would fail in all cases.  The court might have viewed things differently, for example, if the defendants had quit because they had been asked to participate in criminal activity.  Or, if the employees had been employed for a definite term, rather than at will, the result theoretically might have been different.  That said, this opinion definitely supports the proposition that termination of an at-will employee does not invalidate a restrictive covenant in Texas.

Full post as published by Texas Non-Compete Law Blog on May 18, 2010 (boomark / email).