When Do Employers Enforce Non-Compete Agreements?

Originally published by Leiza Dolghih.

Many companies in Texas have non-competition agreements with their employees, but not all companies enforce them.  Some companies will sue the departing employees for violating non-compete agreements, even though such agreements may not be valid under Texas laws.  Others, will not bother with enforcement even though they have valid agreements on hand.  The reality is that the validity of a non-compete agreement is only one factor in a company’s decision whether to enforce it.  The most common reasons that drive companies to enforce their post-employment restrictions with former employees include:

1. protecting a confidential client list taken by a former employee;
2. protecting the company’s confidential information, especially if there is evidence that it has been taken by a departed employee;
3. ensuring that an employee who has received extensive specialized and costly training from the employer is not taking his skills, at least immediately, directly to a competitor;
4. setting an example for other employees that they cannot violate non-compete restraints without consequences.

Additionally, companies will often consider how valuable a particular employee was for their business, and, consequently, how valuable that employee will be to their competitor and how much damage he or she will be able to inflict upon the company’s business when employed by the competition.

Moreover, in deciding whether to enforce non-compete agreements, employers should always consider the following:

1. Is my agreement valid under Texas law?
2. Is my agreement reasonable?
3. What will it cost me to enforce the agreement v. the benefit of enforcement?
4. How likely am I to prevail in a particular jurisdiction?

The answers to the first two questions depend on the language of a particular non-compete agreement, while the answers to the second pair depend on a multitude of factors, such as the jurisdiction of a particular dispute, the likelihood of the parties agreeing to an injunction and, therefore, minimizing legal costs of enforcement, and the parties’ relative legal resources.

BOTTOM LINE:  When a company considers whether to enforce a non-compete or a non-solicitation agre

Leiza Dolghih is a labor and employment board certified partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. Her practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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