Labor & Employment Law

Texas Noncompete Agreements: Effect of Employer Breach

By Robert Wood, David Ellis, and James Landon

What happens if an employer seeking to enforce a non-compete agreement is itself in breach of the agreement.  Does the employer's previous breach adversely affect its ability to enforce the non-compete?  Maybe.

It's "hornbook" law in Texas that one party to a contract is precluded from enforcing a contract if that party itself is in “material” breach. In DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 682 (Tex. 1990, the Texas Supreme Court explicitly recognized that an employer in material breach of an employment agreement could be estopped from enforcing the non-compete provisions contained therein.  Of course, an issue in every case will be whether, assuming the employer is in breach, the breach is “material.”  Failure to pay compensation to which the employee is entitled might, in appropriate circumstances, qualify as material.  Thus, an employer wishing to enforce a non-compete agreement should ensure that it is not already in material breach.

Full post as published by Texas Non-Compete Law Blog on October 22, 2007 (boomark / email).