Geographic Limitations In Texas Non-Compete Agreements

We are blogging on “Non-competes, Trade Secrets, Fiduciary Duties, and the Inevitable Disclosure Doctrine.” Mark Oberti has prepared a detailed paper on all of these issues, which can be found here.

Texas courts generally require some geographic limitation in a valid covenant not to compete. See, e.g., Goodin v. Jolliff, 257 S.W.3d 341, 352 (Tex. App.–Fort Worth 2008, no pet.) (citing cases); Zep Mfg. Co. v. Harthcock, 824 S.W.2d 654, 660-61 (Tex. App.–Dallas 1992, no pet.). “A reasonable geographic scope is generally considered to be the territory in which the employee worked for the employer.” TransPerfect Translations, Inc., 594 F. Supp. 2d at 754 (citing Harthcock, 824 S.W.2d at 660); see also Cobb v. Caye Publ’g Grp., Inc., 322 S.W.3d 780, 783–84 (Tex. App.–Fort Worth 2010, no pet.) (“Generally, a reasonable area for purposes of a covenant not to compete is considered to be the territory in which the employee worked while in the employment of [her] employer.”). “[N]on-compete covenants with restrictions covering a wide geographic area may be reasonable if they are limited in scope to a firm’s current or prospective clients such that they do not pose a greater restraint than necessary to protect the firm’s goodwill.” TransPerfect Translations, Inc., 594 F. Supp. 2d at 754 (citing cases). Covenants with wide geographic areas have been upheld frequently in Texas courts, especially when the area covered constitutes the employee’s actual sales or work territory. See, e.g., Vais Arms, Inc. v. Vais, 383 F.3d 287, 295 (5th Cir. 2004).

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