Non Compete Agreements

     There is probably no area of business law that has changed as much in recent years in the State of Texas as non-compete agreements.  There can be some very complicated and difficult issues that only a lawyer that is familiar with non-compete, or non-competition contracts.  For years, Texas courts viewed non-compete agreements, or non-competition agreements with suspicion.

       For years, the case of Light v. Centel Cellular Co. of Texas was the most important case in regards to non-competition agreements.  Light held that in order for a covenant not to compete to be enforceable when a company offers an incentive and the employee accepts it, the incentive would have to “give rise” to the employer’s interest in restraining the employee from competing.

     The most common example of this was a covenant not to compete that was created when an employee was given access to trade secrets or some sort of confidential information.  The presumption under Light was that the employee would win and a non-compete agreement would be thrown out under almost any circumstance.

      This has changed dramatically with the Texas Supreme Court’s decision in Marsh U.S.A. v. Cook.  In Marsh, the old rule of “employee wins” has been replaced with a line of analysis that is much friendlier to businesses that are trying to enforce a non-compete agreement.  Under Marsh, the analysis focuses upon whether or not the non-competition agreement is “reasonable”.  The factors that a Court will consider include: area, length of time, breadth of activity and necessity.

     There are many current cases where business lawyers and other lawyers that deal with non-compete agreements are testing the bounds of what is “reasonable”.  As time goes on, Texas courts will begin to define exactly what is “reasonable” in a given situation.  If a non-compete agreement is “unreasonable”, the courts will simply “re-write” it so that it is more “reasonable”.  That means that a business is well advised to write the agreement broadly but still be aware that it might be limited or reduced later by a court.