Non-competes and the Employer

With the economy in the shape it’s in, I’ve seen a rise in disputes involving business owners wanting to enforce their non-compete agreements.  This year has provided them with some good case law to support the enforceability of properly-crafted non-compete agreements.

As we’ve learned over the years, a good non-compete contains reasonable limitations as to time, geographical area, and scope of activity to be restrained.  The Houston 1st Court of Appeals recently affirmed that position in Gallagher Healthcare Ins. Svcs. v. Vogelsang, even where there was disagreement about whether the company had actually given the employee confidential/proprietary information in exchange for her promise not to compete and where the agreement did not clearly identify a geographical area to be limited.

The appellate court found that the employer’s conclusory statements offered in an affidavit vigorously challenged by Ms. Vogelsang were enough to serve as proof that its confidential information was an interest worthy of protection and that such information actually had been given to Ms. Vogelsang so that she could perform her job.

As for the lack of a clearly identifiable geographical area to be limited, the Court recognized that a properly crafted non-compete covenant limited to an employer’s clients/customers can serve as a reasonable alternative to an express specification of a geographical limitation.  Since Ms. Vogelsang’s agreement restrained her from any and all activity with clients she had worked with while employed by the company,  the Court reversed the trial court and rendered judgment that the non-compete was enforceable.

Now…this is all well and good.  Do you want to take a wild guess, though, as to what the employer in this case spent defending its position through the trial court proceedings and up to the appellate court?  I can guarantee you it wasn’t chump change.  And that’s without even considering the time key employees had to spend gearing up for trial, depositions, etc.  Could you and your business afford such an expense?

I think the real take-away for an employer is to realize that cutting corners or using a cut and paste/boiler plate agreement that you’ve obtained from a friend is all fine and good - right up until the moment it gets challenged and you are sweating whether it’s enforceable or not and your critical client and proprietary information (indeed, your Company and your livelihood!) is at stake.

Don’t let yourself or your company get caught in that situation.