San Antonio Employment Law Blog : San Antonio Employment Lawyer & Attorney : Thomas Crane Law Firm : South Texas, Bexar County TX Wage & Discrimination Issues

You work for a company for 30 years, acquire a skill, and then join a new, smaller company doing the same job.  You think you have reached a certain level of success.  But, no, you have not.  That is Teresa Jackson's exprience.  She worked for the Scooter Store in Newe Braunfels, Texas for over 31 years as a sales representative.  She left to join Patient's Choice, LLP of Arlington Heights, Illinois.  Patient's Choice is a competitor of the Scooter Store. 

The Scooter Store sent a cease and desist letter to Ms. jackson and filed suit.  They later added Patient's Choice to the lawsuit.  So, Patient's Choice fired Ms. Jackson to get out of the lawsuit.  Patient's Choice offered to rehire Ms. Jackson if she settled the case with the Scooter Store.  But, she reached an agreement with Scooter Store not to work for any competitors for two years.  She said she tried to find a lawyer to help her.  She spoke to 17 lawyers but could not find anyone to help her.  

The Scooter Store said it would suffer irreparable injury if Ms. Jackson was not stopped.  Meaning apparently, that the Scooter Store sought a temporary restraining order stopping her from selling scooters for any competitors.  Ms. Jackson denies the Store's claims.  She says she has no trade secrets.  She just knocks on doctor's doors until someone buys a scooter.  Ms. Jackson says she was railroaded.  

I am sure she is correct.  Ms. Jackson must have signed a non-compete agreement with the Scooter Store.  Texas has a statute that addresses the permissible limits of a non-compete agreement.  Judges impose some limits.  But, still a valid non-compete agreement will impose a time limit and a geographic limit on a worker going to work for a competitor.  Two years is about as long as any court will allow such an agreement. The geographic limits can include states or regions.  The law, in effect, recognizes a temporary, local sort of slavery.  It is part of the price we pay to support businesses and "job growth." 

As I have explained to many potential clients, there is no guarantee that the law will be fair.  Ms. Jackson cannot work for a competitor for two years.  She cannot do work in which she has surely found some success.  But, in the meantime, she must pay her bills and will likely end up in a new industry doing some new job for much less pay.  In two years, employers like People's Choice may not want her skills.  See San Antonio Express News report. 

Yes, its is hard to find an employment lawyer.  We are out here.  But, even if Ms. Jackson did find one of us, there may have ben nothing anyone could do.  Most employers know how to draft a non-compete agreement to make it binding.  The NFL has free agency.  Local business does not. 

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The Texas Supreme Court has ruled that stock options will indeed support a non-compete agreement.  See last week's Texas Supreme Court opinion in Marsh USA Inc. v. Cook. 

I previously wrote about this case here and here.  The Dallas appeals court had found in 2009 that stock options would not support a covenant not to compete.  There must be some binding promise by the employer, such as to provide trade secrets to support a covenant not to compete, said the appellate court.  The Marsh USA decision now overrules this Dallas appellate court opinion.  

Our state difffers from many states which simply require compensation or money to make a non-compete agreement binding.  The law in Texas has been more restrictive, requiring that a promise regarding proprietary information to the employee would be necessary to make a non-compete binding.  

Non-compete agreements have historically been seen as a restraint on free trade.  If an employee could leave a job and take proprietary information, then that employee could start a new business with such information.  Employers needed a way to provide confidential information to employees without fearing they were creating new competition.  So, the Texas Covenants Not to Compete Act was passed.  The CNCA imposes limits on how such agreements can be enforced. 

With this latest decision, the Supreme Court has continued its gradual trend toward making non-compete agreements easier to enforce.  Stock options are now sufficient consideration for a non-compete agreement.  Stock options, said the court, reasonably relate to an employer's good will and encourage an employee to continue in his/her employment.  The Texas Supreme Court has taken another step toward making non-compete agreements less restrictive.  The majority opinion notes and welcomes this shift.  As the dissent points out, if stock options can encourage an employer's goodwill (a requirement under the Covenants Not to Compete Act), then simple compensation may also provide the necessary consideration. 

Three justices dissented, while a fourth issued a concurring decision.  It was a close vote.  But, with this decision, Texas becomes more and more a corporate world and less and less an entrepreneurial world. 

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 Rob Radcliff wrote a piece on noncompetes in Texas at his blog, Smooth Transitions.  He discusses the state law regarding physician noncompete agreements.  A physician noncompete must not impinge on a doctor's access to a list of his/her patients upon his/her departure; the departing doctor must have access to the patients' records when authorized by the patient; and the physician must not be prevented from providing treatment to an acutely ill patient.  

The statute provides the requirements for an enforceable physician noncompete.  You can go here to see the complete statute: Texas Business & Commerce Code Sec. 15.50.  

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So, you have a LInkedin account.  As with most users, many of your contacts are co-workers.  You leave your employer and send messages to your contacts on Linkedin.  Is that a problem?  It is a problem, if you have a non-compete with your former employer in which you agreed to not contact former your former co-workers.  That is what happened in one recent lawsuit.  The former employer, an IT staffing firm, learned of the messages and filed suit against the former co-workers.  See report.  

The former employee had signed a non-compete agreement in which he agreed to not solicit former co-workers.  So, sending an email to all his contacts, co-workers and others, which said, "Hey, let me know if you are still looking for opportunities," sounds like solicitation. 

So, yes, as the report explains, now, when an employee leaves a company, that employee may have to "un-friend" his/her former co-workers.  In this case, the non-compete clearly prohibited solicitation of former employees.  

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 Texas law on non-compete agreements is stricter than many states.  In Texas, the non-compete can be enforceable only if the employer provides some sort of confidential information in exchange for the non-compete agreement.  Typically, the employer provides some trade secret or other proprietary information.  Mike Maslanka pens another excellent post and discusses the state of non-compete law in Texas.  He discusses the case of Marsh USA Inc, Et Al v. Cook.  The lower court of appeals found that since no confidential information passed from employer to employee, then the non-compete signed by Rex Cook is not valid.  Marsh argues that the mere exchange of money serves to make the non-compete binding.  As Mike explains, the arguments are cloaked in legal jargon.  But, in reality, they reflect core Texas values, such as supporting individual entrepreneurs versus securing the fruits of hard-won business success. 

The Texas Supreme Court has accepted the case for appeal.  If Marsh wins, then non-compete agreements will become much more common,as my friend Chris McKinney notes.  

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 Eight ways to lose a non-compete case.  See gruntled employees blog to see how an employer can lose a lawsuit regarding a former employee who has apparently violated a noncompete agreement.  The post provides a nice summary regarding what to avoid.  

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