COVENANTS NOT TO COMPETE IN TEXAS- EMPLOYEE BEWARE

March 26, 2012

1093369_business_shadow.jpgWhen you go to work for someone you may be asked to sign an agreement that prevents the disclosure of confidential information about that employer if you leave your employment. Often these agreements contain a covenant not to compete that prevents you from doing business in competition with the employer for a certain period of time. Covenants not to compete are enforceable in Texas, but must meet the criteria established by Sections 15.50 - 15.52 of the Texas Business and Commerce Code.

A covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains reasonable limitations as to time, geographical area, and scope of activity to be restrained and does not impose a greater restraint than is necessary to protect the goodwill or other business interest of the employer.

A covenant not to compete relating to the practice of medicine is enforceable against a person licensed as a physician if such covenant complies with the following requirements:

(1) The covenant must:

(A) not deny the physician access to a list of his patients whom he had seen or treated within one year of termination of the contract or employment;

(B) provide access to medical records of the physician's patients upon authorization of the patient; and

(C) provide that any access to a list of patients or to patients' medical records after termination of the contract or employment shall not require such list or records to be provided in a format different than that by which such records are maintained except by mutual consent of the parties to the contract;

(2) The covenant must also provide for a buy out of the covenant by the physician at a reasonable price or, at the option of either party, as determined by a mutually agreed upon arbitrator or, in the case of an inability to agree, an arbitrator of the court whose decision shall be binding on the parties and the covenant must provide that the physician will not be prohibited from providing continuing care and treatment to a specific patient or patients during the course of an acute illness even after the contract or employment has been terminated.

A court may award the employer under a covenant not to compete damages, injunctive relief, or both damages and injunctive relief for a breach by the employee.

If the primary purpose of the agreement to which the covenant is ancillary is to obligate the employee to render personal services, for a term or at will, the employer has the burden of establishing that the covenant meets the criteria specified by Section 15.50 of the code. If the agreement has a different primary purpose, the employee has the burden of establishing that the covenant does not meet those criteria.

If the covenant is found to be ancillary to or part of an otherwise enforceable agreement but contains limitations as to time, geographical area, or scope of activity to be restrained that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the employer, the court must reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time, geographical area, and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than necessary to protect the goodwill or other business interest of the employer and enforce the covenant as reformed, except that the court may not award the employer damages for a breach of the covenant before its reformation and the relief granted to the employer shall be limited to injunctive relief.

If the primary purpose of the agreement to which the covenant is ancillary is to obligate the employee to render personal services and the employee establishes that the employer knew, at the time of the execution of the agreement that the covenant did not contain limitations as to time, geographical area, and scope of activity to be restrained that were reasonable and the limitations imposed a greater restraint than necessary to protect the goodwill or other business interest of the employer, and the employer has sought to enforce the covenant to a greater extent than was necessary to protect the goodwill or other business interest of the employer, the court may award the employee the costs, including reasonable attorney's fees, incurred by the employee in defending the action to enforce the covenant.

The criteria for enforceability of a covenant not to compete and the procedures and remedies in an action to enforce a covenant not to compete are exclusive and preempt any other criteria for enforceability of a covenant not to compete or procedures and remedies in an action to enforce a covenant not to compete under common law or otherwise.

At the Law Office of Stephen O'Rear, P.C.we represent people and businesses who have disputes arising from covenants not to compete.