On April 17, 2009, the Supreme Court of Texas continued its trend of finding ways to enforce covenants not to compete in the employment context. In Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, the Court considered "whether a covenant not to compete in an at-will employment agreement is enforceable when the employee expressly promises not to disclose confidential information, but the employer makes no express return promise to provide confidential information."
Fielding was hired by an accounting and consulting firm as a CPA and Senior Manager in the Tax Department. When he accepted the at-will senior manager position he was required to sign the firm's standard at-will employment agreement. The agreement contained a client purchase provision. The client purchase provision required that in the event Fielding performed work for Mann Frankfort's clients in the year following his termination of employment, Fielding was required to purchase that portion of Mann Frankfort's business the particular clients represented.
The agreement lacked any affirmative promise from Mann Frankfort to provide confidential information to Fielding. However, Fielding affirmatively promised not to use or disclose Mann Frankfort's confidential information. When Fielding left employment and began competing, the parties litigated over the validity and enforceability of the employment agreement and client purchase provisions.
The evidence showed that after signing the employment agreement Fielding was provided with access to and use of confidential information of Mann Frankfort and its clients. The information included "clients' names, billing information and pertinent tax and financial information." When Fielding was hired as a senior manager in the firm's Tax Department, he would be required to have and use information confidential to the firm by the nature of his duties.
The Court held that the lack of an affirmative promise to provide Fielding with confidential information in the agreement was not fatal to the enforceability of the agreement or the client purchase provisions in this case. The Court explained that when the nature of the employment will reasonably require the employer to provide confidential information to the employee for him to accomplish his job duties, the employer has implicitly promised to provide the confidential information and the covenant is enforceable as long as the other requirements of the Texas Covenant Not to Compete Act are satisfied.
The effect of this holding will be to make it easier to enforce covenants not to compete in Texas. Additionally, the Court has at least tacitly endorsed those intermediate court of appeals decisions that have concluded that restrictive covenants other than noncompete provisions (e.g., client purchase provisions or forfeiture clauses) should be analyzed like noncompetition provisions that strictly prohibit competition rather than merely providing a monetary penalty for such competition.
