Texas Employment Law Update : Texas Employment Lawyer & Attorney : Russell D. Cawyer : Kelly Hart & Hallman Law Firm : Dallas TX Labor Updates

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 time, geographic, scope limitations that are reasonable.  While no blog post is an adequate substitute for capable legal representation, this two part series is intended to outline some of the relevant issues that Texas practice groups and the physicians employ should consider before they sign an agreement restricting the doctor’s post-employment practice. 

The Texas statute requires that physician noncompetition provisions be reasonably limited in time, geographic scope and scope of activity to be restrained that are legitimate and necessary to protect the employer’s legitimate business interests and goodwill. Interests typically worthy of protection in medical practices usually include the employer’s confidential information, goodwill and referral sources. 

Determining the proper geographic scope of the restrictions can be done by looking as historical data from where the patients reside or the location where the referral sources are located (i.e., the doctors referring the patients to the practice group) that represent a significant amount of the practice group's revenue. Other options include whether the geographic scope is measured from the referring doctor’s office or the practice group where the physician signing the noncompetition agreement will practice. The importance of this designation will likely depend on whether the employer’s legitimate interests are in protecting its existing patient population or the referral sources from which it derives its new patients.

The proper temporal scope should be that amount of time it takes to recruit, hire and introduce to the referral community to the replacement physician. Some practice groups choose a year or two limitation while others choose the amount of time it took to recruit and hire the physician that is being hired and asked to sign a noncompete with some additional time added to account for the time it takes to introduce the new doctor to the medical community and referral sources. The more highly specialized practice (and conversely fewer number of qualified physician replacements) may justify a longer temporal scope of restriction. Conversely, practice areas that are less specialized or where there are an abundant number of replacement physicians eligible for hire, may only support a shorter noncompetition period.  

In the next post, I'll discuss the buy-out feature that Texas law requires to be included in every physician noncompete and that allows the physician to buy his or her way out of the noncompetition agreement.

Follow me on Twitter @RussellCawyer

Like this on Facebook.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Many times one competitor sues another competitor over the hiring or two or more employees (whether over allegations of a breach of contract or misappropriation of trade secrets), the Complaint will make allegations of employee "poaching".  This gives rise to the question about whether Texas recognizes a cause of action for one competitor's poaching of another competitor's employees.  The answer is "yes" and "no." 

While there is no recognized cause of action called "poaching" for a competitor's targeting, soliciting and hiring groups of its competitor's employees (remember, Texas is a right to work state and restraints of trade are highly disfavored), there are recognized causes of action, remedies and tools available to employers who find their workforce the target of a competitor's poaching.  These include use of and enforcement of covenant not to competes; investigating and bringing claims for misappropriation of confidential information; theft of trade secrets; claims for unfair competition; breach of the duty of loyalty and fiduciary duty; tortious interference with contract; computer fraud and abuse; and conspiracy to tie together all the defendants acting in concert together.  

So while there may be no claim titled "poaching" under state law, there are recognized claims that can allow for an employer remedy against a competitor that has unlawfully targeted another competitor's employees.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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 can access the Court's opinion in Greenville Surgery Center Ltd. v. Beebe here.  In short, the noncompete lacked the buy-out clause required by the statute.  That defect alone was sufficient to render the noncompetition obligation unenforceable.

Beebe should remind Texas employers that when drafting noncompetition agreements, it is important to have a knowledgeable, Texas attorney review the agreement before having employees or partners sign it.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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 firm.

In the season finale, Don Draper, Roger Sterling and Bert Cooper learn that their New York subsidiary of a London-based advertising firm ("PPL") is being sold to a competitor.  Shackled by noncompetition agreements they signed when their firm was purchased by the London firm and intent on not working for their competition, they evaluate their options. 

The solution --conspire with the office manager (a long-time PPL employee who will be cast aside following the sale) to terminate their contracts (fire them) in return for a partnership interest in the new venture.  To ensure that their plans are not discovered, the office manager strategically waits to advise PPL's home office of the terminations until the close of business Friday afternoon thereby ensuring that PPL will not learn of the change until Monday morning.  Over the course of the weekend, Draper and company loot client files; take account and marketing materials; and go on a wholesale campaign to solicit firm clients to join the new firm.  This is the season finale and so we don't yet know whether the 1960's London-based company response will be to file lawsuits or do nothing. 

In today's times, I would expect the next season would begin, and end, as follows.  The episode opens in a courtroom where Draper, Sterling and Cooper are about to be sentenced for certain criminal offenses.  The next scene then flashes back to last season's finale with Draper and company wheeling out boxes and boxes of information from their old employer; making solicitations to the customers of their old firm; and competing fiercely for new business.  Lawyers are engaged; lawsuits are filed.  Draper and company are slapped with injunctions that prohibit them from calling on or doing business with old firm clients and from using the confidential, proprietary information that was misappropriated from the old employer.  Next, a grand jury is summoned by the U.S. Attorney for the Southern District of New York. Our heroes are indicted for theft of trade secrets and a whole host of other misconduct.  Draper files for bankruptcy since his resources are drained by being a partner in an advertising firm that is enjoined from working with clients --not to mention the divorce from his lovely wife Betty.  Finally, our Mad Men plead guilty to criminal offenses and are sentenced to moderately lengthy prison sentences.  Next season's opener ends up being the series finale because the protagonists misappropriated and used information that belonged to their old employer.

What this episode of "Mad Men" teaches is that if one is going to leave an employer and either work for a competitor or start a competing venture; don't do it like the Mad Men.  Departing employees should 1) honor reasonable and enforceable contractual agreements regarding competition and nondisclosure of confidential information; 2) not take or use anything from the former employer; and 3) compete fairly.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link