At-Will Employees’ Fiduciary Obligations In Texas (Part I)

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.

In Texas, an at-will employee breaches his or her fiduciary duty to his or her employer if, during his or her employment, he or she: (1) misappropriates the employer’s trade secrets; (2) solicits the employer’s customers while still working for the employer; (3) solicits the departure of other employees while still working for the employer; or (4) carries away confidential information. See Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 202 (Tex. 2002); Abetter Trucking Co., Inc. v. Arizpe, 113 S.W.3d 503, 512 (Tex. App.–Houston [1st Dist.] 2003, no pet.). In Rimkus Consulting Group, Inc., 688 F. Supp. 2d at 669-70, Judge Lee Rosenthal denied summary judgment against the former employer’s breach of fiduciary duty claim because there were disputed fact issues on whether the employee-defendant breached his fiduciary duty to Rimkus by misappropriating confidential, proprietary, or trade secret information obtained while he was an officer of Rimkus, and then used that information to solicit Rimkus customers and compete against Rimkus.

Aside from the above limitations, however, Texas law is clear that taking preparatory steps to compete with an employer while still working for that employer is not actionable. See Navigant Consulting, Inc. v. Wilkinson, 508 F.3d 277, 284 (5th Cir. 2007) (“[U]nder Texas law, an at-will employee may properly plan to go into competition with his employer and may take active steps to do so while still employed. Even the existence of a fiduciary relationship between employee and employer does not preclude the fiduciary from making preparations for a future competing business venture; nor do such preparations necessarily constitute a breach of fiduciary duties.” (quotation marks and citations omitted)); Ameristar Jet Charter, Inc. v. Cobbs, 184 S.W.3d 369, 374 (Tex. App.–Dallas 2006, no pet.) (holding there was no breach of fiduciary duty when an employee formed a competing business while still employed but did not actually compete with the employer until he resigned); Abetter Trucking Co., 113 S.W.3d at 510; Augat, Inc. v. Aegis, Inc., 409 Mass. 165, 565 N.E.2d 415, 419 (1991) (quoted by the Texas Supreme Court in Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 201 (Tex. 2002)). Indeed, in Texas, as a legal matter, to resign from one’s employment and go into business in competition with one’s former employer is, under ordinary circumstances, a constitutional right. Abetter Trucking Co., 113 S.W.3d at 510.

The employee has no general duty to disclose his plans and may secretly join with other employees in the endeavor without violating any duty to the employer. Id.; M P I, Inc. v. Dupre, 596 S.W.2d 251, 254 (Tex. Civ. App.–Fort Worth 1980, writ ref’d n.r.e.). Further, an employee may use his general knowledge, skill, and experience acquired in the former employment to compete. Abetter Trucking Co., 113 S.W.3d at 512. Moreover, the possibility of crippling, or even destroying, a competitor is inherent in a competitive market. Id. at 510; Augat, 565 N.E.2d at 422.

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