New Trend Among Texas Courts Backing Non-Compete Contracts Expected to Continue in 2008, According to Steve Cochell Epstein Becker Green Wickliff and Hall, P.C.
HOUSTON -- Texas courts are expected in 2008 to continue favoring enforcement of non-compete clauses in contracts, according to attorney Steve Cochell of Epstein Becker Green Wickliff and Hall, P.C.
"For Texas businesses, the 2008 extension of 2007's trend toward court rulings on non-competes will be a welcome development," says Cochell, who specializes in Labor and Employment Law.
The thousands of companies across Texas that deal with sensitive information, such as trade secrets, have long feared that this information could go out the door when a key employee leaves for a competitor. The state's courts, until recently, have not consistently enforced so-called non-compete clauses of employment contracts with employees who are provided confidential or trade secret information as part of their employment. These limit employees' ability to use such information to compete against the employer when they leave the company. Enforcement was difficult because the law was unclear.
In October 2006, the Texas Supreme Court's Sheshunoff v. Johnson ruling clarified the issue and enabled more companies to successfully enforce their non-compete clauses. In 2007 state courts followed the high court's lead on non-compete clause enforcement. Employment lawyers generally agree that "the pendulum has now swung in favor of employers," says Cochell.
"Key employees frequently left an employer to join a competitor, after downloading the employer's confidential information and trade secret technology obtained or learned during their employment," said Cochell. "Thanks to the Texas Supreme Court, employees now find it harder to steal and then use confidential and proprietary information to compete against their former employers."
Formerly the costs of enforcing non-competes in Texas often outweighed the benefits of litigation, discouraging employers from attempting it.
"The consequences of not obtaining and enforcing a non-compete can be disastrous to a small, medium, or even a Fortune 500 company," adds Cochell. "With employees that it hires or adds through acquisition, the company should protect its confidential and proprietary information in the same way it would protect any other assets."
In a non-compete agreement, the employer promises to provide the employee confidential and proprietary information during employment. In exchange, the employee agrees to refrain from working for a competitor for a certain period of time, from soliciting or servicing the former employer's customers or recruiting employees, and from divulging the information during and after employment. According to Cochell, "An employer must actually commit to providing confidential information for a non-compete to be valid. Such information must be shared during the course of employment."
Employees who violate a non-compete agreement could face legal penalties. Information on marketing, pricing strategies and customer purchasing habits can qualify as "confidential" to an employer even though others within the industry may hypothetically obtain it.
About Epstein Becker & Green, P.C.
Founded in 1973, Epstein Becker & Green, P.C., is a law firm with more than 380 attorneys practicing in 11 offices throughout the U.S. - Atlanta, Chicago, Dallas, Houston, Los Angeles, Miami, New York, Newark, San Francisco, Stamford, and Washington, D.C. -- and affiliations worldwide. The firm's size, diversity, and global affiliations allow our attorneys to address the needs of both small entrepreneurial ventures and large multinational corporations on a worldwide basis. EBG's five core practices include: Business Law, Health Care and Life Sciences, Labor and Employment, Litigation and Real Estate.
