Chapter § 9-1 Thirty-Thousand-Foot Perspective

• Jurisdiction: United States

9-1 Thirty-Thousand-Foot Perspective

9-1:1 Commentary

A few thoughts from the 30,000-foot perspective.

First, never overlook a crucial threshold question: is the employee actually in competition with the former employer? A 2013 case from the Dallas Court of Appeals highlights the importance of this sometimes overlooked factor:

• Strange v. HRsmart, Inc., 400 S.W.3d 125 (Tex. App.—Dallas 2013, no pet.) (noncompete prohibited employee from working at a "competing business," defined as one that provides the same or substantially similar prospects and services; in reversing summary judgment for the employer, the appeals court held there was a fact issue on whether defendant was in a "competing" business, noting that the two companies targeted different markets and that their product offerings differed).

Second, covenants not to compete are restraints on trade (a fairly broad concept that we will discuss) and are thus unenforceable—as a matter of public policy—unless the restraints on time and geographic scope are reasonable under the Texas Business and Commercial Code 15.50.

• Leath v. Tracer Constr. Co., No. 1:08-CV-358, 2009 WL 8188138 (E.D. Tex. Aug. 18, 2009) (unpublished) (excellent collection of cases).

Third, as a legal matter (but not always a practical one in certain venues), whether there is a reasonable restraint is a question of law for the court—not a question of fact for the jury.

• Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).

Fourth, an employer cannot circumvent the requirements of the Texas Business and Commercial Code by assigning a different name to a noncompete, such as a nonsolicitation clause of customers. A nonsolicitation provision is functionally still a noncompete (in other words, it is a restraint on trade). An employer cannot therefore impose a liquidated damage provision upon a departing employee because that kind of penalty is a functional noncompete agreement. ("Yes, you can go to work elsewhere, and a feel free to do so, but you must pay us X percent of your first-year salary to do so.").

• SafeWorks, LLC v. Max Access, Inc., No. H-08-2860, 2009 WL 959969, *3-4 (S.D. Tex. Apr. 8, 2009) (collection of cases finding that nonsolicit is a restraint on trade and therefore must satisfy the limitations imposed by the Business and Commercial Code in Peat Marwick Main & Co. v. Haass, 818 S.W.2d 381 (Tex. 1991)).

Texas courts are faithful to Haass.

• John R. Ray & Sons, Inc. v. Stroman, 923

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