In an unpublished opinion, the San Antonio Court of Appeals held that a former employee cannot avoid the effects of a noncompetition agreement under the doctrine of unclean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, Inc. v. Espinoza, CTOP sued Espinoza after he resigned his employment and went to work for a direct competitor in violation of a noncompetition agreement he signed with CTOP. Espinoza contended that the noncompetition agreement could not be enforced against him because CTOP had violated a separate Compensation Agreement by failing to pay all wages and commissions owed to him. The trial court agreed and granted summary judgment for Espinoza.
The San Antonio Court of Appeals reversed the judgment for Espinoza and held that since CTOP’s alleged failure to pay Espinoza did not grow out of the obligations outlined in the Noncompetition Agreement, the alleged breaches of the separate Compensation Agreement could not, as a matter of law, constitute an unclean hands defense to the noncompetition agreement.
Employees frequently try to avoid the effects of restrictive covenants claiming that the employer violated some obligation to the employees; thereby precluding the enforcement of the restrictive covenant under the doctrine of unclean hands. CTOP continues the Texas judiciaries’ trend of making it easier to enforce noncompetition agreements in the state of Texas.
Earlier: Texas Supreme Court holds that Covenants Not to Compete that Contain Implicit Promises to Provide Confidential Information are Enforceable.