Employees acquire valuable information about your business, and firsthand knowledge of its operations, during the course of their employment. Moreover, employers often invest significant resources to educate and train their employees. How can a business protect itself from a former employee vying for its clients? One way is through a non-compete agreement.
In general, a non-compete agreement is a contract in which an employee agrees not to compete in the marketplace with the employer. To be enforceable, “a covenant not to compete must be (1) ancillary to or part of an otherwise enforceable agreement and (2) contain reasonable limitations as to time, geographic area, and scope of activity that do not impose a greater restriction than necessary.” Fomine v. Barrett, 01-17-00401-CV, 2018 WL 6376500, at *3 (Tex. App.-Houston [1st Dist.] Dec. 6, 2018, no pet.).
When a non-compete is determined to be unreasonable, courts have the power to reform the agreement “as to time, geographical area, and scope of activity to be restrained….” Tex. Bus. & Com. § 15.51.
Restrictions must be reasonable and may not impose greater restrictions than necessary
Recently, Cleaver-Brooks Sales and Service, Inc., a provider of boiler equipment, filed suit against a former employee for allegedly breaching a non-compete agreement by working for a competitor. See Cause No. 103711-CV; Cleaver-Brooks Sales and Service, Inc. v. Larry Roswell; In the 412th Judicial District Court of Brazoria County, Texas (the “Trial Court”). The Trial Court granted Cleaver’s request for injunctive relief which, according to the former employee, put him out of work for a period of three months. See Cause No. 14-19-00673-CV; Larry Roswell v. Cleaver-Brooks Sales and Service, Inc.; In the 14th Court of Appeals, Houston Division.
On appeal, the former employee argued that the Trial Court abused its discretion by granting injunctive relief because “the non-compete…is broader than necessary to protect Cleaver-Brooks’s legitimate interests and it imposes an unduly, oppressive burden against [the former employee]….” Id. According to the former employee, the five-year duration and large geographic scope is unreasonable and overbroad as it effectively prevents him from working in the entire boiler industry. Id. The matter is pending before the Court of Appeals.
Employers and employees alike have rights and obligations under Texas law. When business owners or employees find themselves facing employment disputes, they benefit from enlisting the help of experienced legal counsel who understand the unique issues involved. To learn more about the rights of business owners and employees in Texas, contact one of our experienced attorneys today.