ADVERTISEMENT



Google       

Home -> Law Blog Directory -> Labor & Employment Law Blogs -> Texas Non-Compete Law Blog

OR PHONE (866) 635-1838 for Bankruptcy Help, (866) 635-6190 for Divorce,
(866) 635-2689 for Personal Injury or (866) 635-9402 for Criminal Defense

Find a Local Lawyer

Bankruptcy (866) 635-1838
Divorce (866) 635-6190
Personal Injury (866) 635-2689
Criminal Defense (866) 635-9402

Bookmark

Labor & Employment Law

: Texas Non-Compete Law Blog

Enforceability of Clawback Provisions in Texas

By Robert Wood

ADVERTISEMENTS

What happens when an employer gives an employee stock in exchange for a non-compete agreement, but the non-compete agreement is held to be unenforceable.  Does the employee still get to keep the stock?  This question was raised in a case in which the employer gave a ten percent ownership interest in the company to one of its employees.  The employer prepared a stock certificate in the employee's name, but it retained possession of the stock certificate. 

Approximately four years after executing the agreement, the employee left the employer and took a job with a competing company.  The employer claimed that because the employee breached the non-compete agreement, he was not entitled to the stock.  The employee filed suit seeking a declaratory judgment that the stock issued in his name should be delivered to him.

The trial court ruled that the noncompete agreement amounted to an unenforceable restraint of trade and awarded the employee the stock.  The court of appeals agreed that the noncompete agreement was unenforceable, because it was unlimited as to time and extended to customers with whom the employee had no association with while working for the employer. 

However, the court also held that the employee should not receive the stock. In reaching this conclusion, the court considered whether the promise not to compete and the promise of stock were mutually dependent promises.  That is, but for the employee's promise not to compete, the employer would not have promised to give him stock.  Because the employer did not get what it bargained for (i.e., the employee's noncompetition), the employee was not entitled to the consideration promised by the employer (i.e., the stock).  Therefore, the employee was allowed to work for the new employer, but he lost the stock. 

As we can see from this case, an employee who challenges the enforceability of a non-compete agreement may, if he or she prevails, forfeit the consideration (in this case, stock) that was given for the non-compete.


John R. Ray & Sons, Inc. v. Stroman, 923 S.W.2d 80 (Tex. App.—Houston [14th Dist.] 1996, writ denied).


 

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

Bloggers, promote your law blog by nominating your blog for inclusion in USLaw.com's Law Blog Directory and RSS Reader. Benefits described.
Related Law Blog Posts
Search Blog Directory:

Search Blog Directory:

Related Law Articles

Lawsuits and Settlements

Related Searches

























































































































US Law
#1 Online Legal Resource













Your Blog Subscriptions
Subscribe to blogs

10,000+ Law Job Listings
Lawyer . Police . Paralegal . Etc
Earn a law-related degree
Are you the author of this blog? Adding USLaw.com to your Blogroll increases relevance. You qualify to display a USLaw Network badge.
Suggest changes to this blog's description or nominate another for inclusion. Register for updates.


Practice Area
Zip Code:

Contact a Lawyer Now!






1.5581 secs (new cache)