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 can and cannot due within the bounds of a common law fiduciary duty of loyalty. As the court summarized,
The Texas Supreme Court has recognized that fiduciary employees owe duties of loyalty to their employers and, if a fiduciary employee "takes any gift, gratuity, or benefit in violation of his duty, or acquires any interest adverse to his principal without a full disclosure, it is a betrayal of his trust and a breach of confidence, and he must account to his principal for all he has received." But an employer’s right to demand and receive loyalty from a fiduciary employee must be tempered by society’s interest in encouraging competition. Thus, in general, an at-will employee–even a fiduciary one–may plan to compete with his employer and take certain steps toward that goal without disclosing his plans to the employer, but he may not "appropriate his employer’s trade secrets," "solicit his employer’s customers while still working for his employer," "carry away certain information, such as lists of customers," or "act for his future interests at the expense of his employer by using the employer’s funds or employees for personal gain or by a course of conduct designed to hurt the employer."
Whether Engel had a fiduciary duty to disclose the creation of the competing business Caputech and his plans to associate with Matrikon depends on what his job responsibilities were at PAS. If the fact-finder determines that his job responsibilities were those of a fiduciary, in dealing with his principal on a matter involving his own self-interest that would limit his employer’s contractual rights, he owed a duty of full disclosure of all material facts. If so, he could not legally put his interests above that of PAS "by a course of conduct designed to hurt [PAS]."
(Citations omitted). If you are an employee considering leaving your current employer to start a venture that competes with your current employer, you should contact competent counsel to ensure that you do not cross the line from lawful preparations to compete to unlawful, unfair competition.
You can download a full copy of PAS, Inc. v. Engel here.
Follow me on Twitter @RussellCawyer.