“Litigation over agreements not to compete after the termination of employment has long been a staple of business litigation.” Michael Quinn & Andrea Levin, Post Employment Agreements Not to Compete: a Texas Odyssey, 33 Tex. J. of Bus. L. 7, 9 (Spring 1996). In Texas, the enforceability of noncompetition agreements (“noncompetes”) has widely varied. By the end of the 1980s, noncompetes were highly disfavored by Texas courts. The Texas Legislature responded with the Texas Covenants Not to Compete Act. (Tex. Bus. & Com. Code § 15.50-52), which was intended to favor noncompetes. That act required enforcement of noncompetes so long as they are: (1) ancillary to an otherwise enforceable agreement, (2) serve a legitimate business purpose, and (3) contain reasonable limits as to time, and geography and scope of activity restricted.
In the Texas Supreme Court’s 1994 Light v. Centel Cellular decision, however, the court retained a large degree of the traditional judicial hostility to noncompetes. The year 2006 witnessed the beginning of a sea change regarding the enforceability of noncompetes. In Alex Sheshunoff Management Services v. Johnson, the Supreme Court gave heed to the legislative directive favoring the enforcement of reasonable noncompetition agreements. Sheshunoff found that a mere promise to give training and confidential information in the future supported the noncompete provisions in an otherwise valid employment agreement.
