Texas Employment Law Update

Texas Employment Law Update

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Category Archives: Noncompetes and Restrictive Covenants

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DOJ to Criminally Prosecute Employers and Individuals that Reach Hiring and Wage Agreements under Federal Antitrust Law

Posted in News & Commentary, Noncompetes and Restrictive Covenants
At the end of October, the U.S. Department of Justice Antitrust Division (DOJ) and Federal Trade Commission (FTC) communicated a significant shift in their enforcement guidance regarding competition among employers to limit or fix terms of employment for potential hires.  In a new publication, Antitrust Guidance for Human Resource Professionals, the DOJ announced its intent to investigate,… Continue Reading

New Developments in Employee Hiring and Noncompetition

Posted in News & Commentary, Noncompetes and Restrictive Covenants
Last week brought several interesting developments on the issue of restrictive covenants and hiring of employees among competitors including 1) the White House’s call to action (CTA) for the States to restrict use of covenants not to compete; 2) the Department of Justice’s announcement that it intends to criminally prosecute employers and executives entering into wage-fixing and… Continue Reading

Texas Supreme Court Holds that Forfeiture Provision In Incentive Plan Not A Noncompete

Posted in Case Summaries, Noncompetes and Restrictive Covenants
I wrote about the case of Drennen v. Exxon Mobile over a year ago.  Drennen was the case of the Exxon executive who forfeited millions of dollars in incentive compensation when he left Exxon to work for a competitor.  You can read the background of the case here.  Today, the Texas Supreme Court held that a forfeiture clause contained… Continue Reading

Court Holds that Reasonableness of Physician Buy-Out Clauses in Noncompetition Agreements Can be Challenged Even When Parties Previously Agreed to Amount

Posted in Case Summaries, Noncompetes and Restrictive Covenants
I have written several posts outlining the unique requirements that employers must include to create a valid noncompeteition agreement with a physician. (posts here and here). A recent case from the Beaumont Court of Appeals holds that even when a physician noncompetition agreement contains a reasonable buy-out clause, the employer may still have to arbitrate the reasonableness… Continue Reading

U.S. Supreme Court Holds that Arbitrator, Not State Court, Must Determine Enforceability of Noncompetition Agreement

Posted in Arbitration, Case Summaries, Noncompetes and Restrictive Covenants
In a per curiam opinion, the U.S. Supreme Court held that under the Federal Arbitration Act arbitrators, not courts,must determine the enforceability of covenants not to compete when the parties are subject to agreements that call for the mandatory arbitration of disputes. In Nitro-Lift Technologies v. Howard, two employees left their employment with Nitro-Lift and began working… Continue Reading

Court Holds Forfeiture Provision in Executive Stock Incentive Program Unenforcable Noncompete

Posted in Case Summaries, Noncompetes and Restrictive Covenants
Covenant not to compete cases normally arise when an employer seeks to enforce a restrictive covenant by having a former employee enjoined from breaching the covenant and working for a competitor.  They can also arise when the employee is not expressly prohibited from competing, but is subjected to severe economic penalty if he engages in… Continue Reading

Antitrust Concerns Raised When Competitors Get Too Cozy

Posted in News & Commentary, Noncompetes and Restrictive Covenants
When competitors make agreements with one another about what they will charge, the territories they will divide, the customers each will sell or the employees they will hire, red flags should raise because antitrust issues may be implicated. Last year I wrote about the settlement several Silicon Valley technology companies reached with the US Department of Justice’s… Continue Reading

Employers Should Provide Cell Phones to Their Sales Force

Posted in Human Resources, Noncompetes and Restrictive Covenants
Employers should provide (and pay for) the cell phones and other PDA’s used by their sales force.  Why?  So that the company is entitled to, and can insist on, the return of the telephone, the assigned telephone number and the contacts and other wealth of information contained on those devices when the employment relationship ends.  If… Continue Reading

Handling Texas Noncompetes After Marsh USA (Part 2)

Posted in Noncompetes and Restrictive Covenants
In Part 1, I covered some thoughts on enforcing noncompetition agreements in Texas following the Texas Supreme Court’s new decision in Marsh USA.  Today I’m addressing some tips that employees (and their representatives) who are asked to sign or are attempting to bust a noncompetition agreement might consider. Prior to signing the agreement, negotiate everything you can. … Continue Reading

Handling Texas Noncompetes After Marsh USA (Part 1)

Posted in Noncompetes and Restrictive Covenants
Yesterday, Ryan Miller and I were invited to speak at the Tarrant County Bar Association’s Labor and Employment Section luncheon.  Our topic was the recent changes to Texas noncompete jurisprudence.  A copy of the Power Point presentation we jointly presented can be accessed here. For my contribution, I presented some thoughts on the practical effect the Marsh USA decision… Continue Reading

Recruiters Beware of Candidates with Noncompetition Agreements

Posted in Human Resources, Noncompetes and Restrictive Covenants
Yesterday Rob Radcliff over at the Smooth Transitions Law Blog wrote a post about a lawsuit filed by an attorney against the recruiter that placed him at his new law firm.  In essence, the attorney alleged that the recruiter made representations that she was independent (and not tied to any particular law firm) and fraudulently convinced the attorney to… Continue Reading

Physician Noncompetes: Part 2 Reasonableness Of The Buy-Out Amount

Posted in Noncompetes and Restrictive Covenants
In Part 1 of this two-part series, I examined the temporal, geographic and scope of activity restrictions for Texas physician noncompetition provisions.  Texas law provides another unique feature required only in agreements with doctors.  Noncompetes with physicians must include a provision that permits the doctor to buy-out of the noncompete for a reasonable amount. The buy-out can be determined at inception… Continue Reading

Physician Noncompetes: Part 1 Reasonable Limitations On Time And Geographic Scope

Posted in Noncompetes and Restrictive Covenants
I’ve written before about the unique requirements that must be included in a noncompetition agreement with a Texas physician. The increasing likelihood that a Texas court will enforce a noncompetition agreement against any departing employee increases the importance that physicians and practice groups take great care in negotiating and drafting agreements with proper limitations as to… Continue Reading

When Does Preparing to Compete Become Unlawful Competition?

Posted in Noncompetes and Restrictive Covenants, Trade Secrets
In Texas, at-will employees can prepare to compete against their current employers without violating the common law duty of loyalty.  Determining whether the line between lawful preparation to compete and unlawful competition begins is sometimes gray.  (See post).  A recent case from the Houston Court of Appeals provides a good summary of what an at-will employee… Continue Reading

BREAKING NEWS: Texas Supreme Court Issues Opinion Enforcing Non-Compete Supported by Stock Options and Goodwill

Posted in Case Summaries, Human Resources, Noncompetes and Restrictive Covenants, Trade Secrets, Unemployment
The Texas Supreme Court has issued an opinion this morning holding that noncompetition agreements supported by stock options and good will are not unenforceable as a matter of law.  I previewed this case here.  As I have time to digest the majority, concurring and dissenting opinions, I’ll provide more thoughts on this case. You can… Continue Reading

Competitors Beware — No-Hire Agreements May Draw Unwanted Attention from the Feds

Posted in Noncompetes and Restrictive Covenants
Last year the Antitrust Division of the U.S. Department of Justice filed suit against several technology sector companies over their mutual agreements not to recruit each other’s employees through the use of cold-calling. The DOJ contended that such agreements (sometimes called no-switching or no-poaching agreements) had the effect of reducing competition for high tech employees; limited employees’ opportunities to find… Continue Reading

Dallas Court Strikes Physician Noncompete that Lacked Buy-Out Provision

Posted in Case Summaries, Noncompetes and Restrictive Covenants
I’ve previously written about the specific requirements that must be included in a covenant not to compete with a licensed physician to make the restrictive covenant enforceable.  The Dallas Court of Appeals recently affirmed a trial court’s decision that a noncompetition agreement between a surgical practice and several limited-partner physicians was unenforceable because the agreement lacked one of the statutorily required provisions.  You… Continue Reading

Supreme Court of Texas Grants Review in Stock-Options Noncompete Case

Posted in Noncompetes and Restrictive Covenants
Last summer, I detailed the Dallas Court of Appeals’ decision in Marsh USA, Inc. v. Cook where the court held a noncompetition agreement supported only by stock-options as consideration was unenforceable.  You can read that post here. Today, the Supreme Court of Texas announced that it would hear the appeal from the Dallas Court of Appeals.  You can view the order… Continue Reading

Appeals Court Holds Trial Court Must Conduct Evidentiary Hearing in Ruling on Temporary Injunction in Noncompete Case

Posted in Case Summaries, Noncompetes and Restrictive Covenants
A trial court’s order granting or denying a temporary injunction in a noncompete case is rarely reversed by the court of appeals.  This week the Fourteenth Court of Appeals took the unusual step of reversing a trial court’s denial of an employer’s application for temporary injunction seeking to prohibit a former employee from engaging in certain competitive… Continue Reading

San Antonio Court of Appeals Holds Doctrine of Unclean Hands Doesn’t Invalidate Noncompetition Agreement

Posted in Noncompetes and Restrictive Covenants, Trade Secrets
In an unpublished opinion, the San Antonio Court of Appeals held that a former employee cannot avoid the effects of a noncompetition agreement under the doctrine of unclean hands, as a matter of law, when the inequitable conduct the employee complains of is separate from the issue in dispute.  (Opinion available here).  In Central Texas Orthopedic Products,… Continue Reading

“Mad Men” Teaches What Not To Do When Leaving An Employer to Form a Start-Up Competitor

Posted in Human Resources, Noncompetes and Restrictive Covenants
Last week’s season finale of AMC’s critically acclaimed series "Mad Men" shows a prime example of how to get involved in big time litigation when leaving a former employer to start-up a competing enterprise or work for a competitor. Mad Men is a made for cable series set in the 1960’s about a Madison Avenue advertising… Continue Reading

Texas Appellate Court Continues Trend of Enforcing Noncompetition Agreements

Posted in Noncompetes and Restrictive Covenants
Since the Texas Supreme Court’s Sheshunoff and Mann Frankfort opinions, Texas appellate courts have, with increasing frequency, enforced covenants not to compete in the employment context.  Gone are the days when noncompetition agreements were difficult to draft and enforce in Texas. In Gallagher Healthcare Insurance Services v. Vogelsang, the First District Court of Appeals in Houston… Continue Reading