The Texas Supreme Court Makes It Easier for Employers to Enforce Noncompetition Agreements
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Many employers who desire to protect trade secrets or other confidential information utilize so-called noncompetition covenants.  In a noncompetition covenant, the employee agrees not to compete with the employer for a certain time period, and in a certain geographic area, following the termination of employment.  For many years the law has been unclear as to whether and when noncompetition covenants are enforceable as to at-will employees who may be terminated at any time with or without cause.  In many cases, courts have refused to enforce noncompetition covenants where, in exchange for the employee’s agreement not to compete, the employer merely promises to provide access to trade secrets or confidential information at some point during employment in the future.  The uncertainty about the enforceability of noncompetes has concerned both employers seeking to prevent current employees from competing and employers who hire employees with noncompetes from previous employers. 
 
In a recent decision called Alex Sheshunoff Management Services, LP v. Kenneth Johnson and Strunk & Associates, LP (“Sheshunoff”), the Texas Supreme Court made it clear that as long as an employer promises an at-will employee access to confidential information or specialized training, and the employee in fact receives such information or training prior to termination, the employee’s agreement not to compete is enforceable.  There is no requirement, as some courts had previously held, that the employee actually receive confidential information or training at the time the agreement is made.  However, the Court reaffirmed that a noncompete must be reasonable in terms of time, geographic area, and the activity to be restrained.   For example, it may not be reasonable to enforce a broad noncompete when the employer has provided only a limited amount of confidential information or training. 
 
The Bottom Line for Employers
 
The Court’s ruling in Sheshunoff should make it easier to enforce noncompetition agreements against at-will employees.  Employers should carefully review the decision before drafting or re-drafting noncompetes, when deciding how to enforce noncompetes, or when deciding whether to employ a person who entered into a noncompete with a prior employer. 

*  Muskat, Martinez & Mahony, LLP represents employers in labor and employment law matters.  For more information, visit our website at www.m3law.com, or contact any of our partners:
 
Mike Muskat, (713) 987-7851, mmuskat@m3law.com
Samantha Martinez, (713) 987-7852, smartinez@m3law.com
Michelle Mahony, (713) 987-7849, mmahony@m3law.com