You’re an employer who does business throughout the state of Texas, which covers more than a quarter-million square miles. An employee leaves your company and goes to work for another company that does the same kind of work you do.
Then you learn of the ex-employee’s new job and the task he is doing and you sue the former employee for breaching what you believe was a no-compete clause in place when he worked for you. Is it enough to say you do business in Texas and, thus, you can restrict a former employee from going to work for some other firm that competes with you?
No can do, according to the First Court of Appeals, which issued a ruling in favor of the employee and against the former employer who had sued over the non-compete clause.
You have to ensure that the no-compete agreement is worded precisely and that it is tailored narrowly to protect your own financial self-interest.
The case in question involved a masonry company in Houston, which had fired and then sued an employee for going to work for another firm. Morrell Masonry Supply Co. said that because it does work statewide, that restricted its former employee from doing the same thing anywhere in the state. The employee filed a request for a summary judgment against his former employer, contending that the non-compete clause was unreasonable and not enforceable.
The court agreed with the employee. In its ruling, the appellate court said, “statewide restriction in the covenant not to compete in that instant case [was] too broad to be enforceable because it far exceede[d] the two cities in which Coddou worked on behalf of [MMS], even if MMS’ business extended beyond the area assigned to Coddou.”
There you have it.
You can set a statewide non-compete clause in a state that is as large as Texas if an employee actually makes sales calls throughout the state. However, take care to avoid unreasonable restrictions when the former employee’s territory doesn’t cross your own.