Texas Legislative Round-Up
The 82nd session of the Texas legislature resulted in several new laws affecting employers. We summarize the more noteworthy legislation in this article. All laws are effective September 1, 2011, unless otherwise noted.
Don't Mess With Noncompetes In Texas
Taking another step toward easier enforceability of noncompete agreements and away from its own decisions interpreting the Texas Covenants Not to Compete Act, the Texas Supreme Court ruled in Marsh USA Inc. v. Cook that a noncompete covenant contained in a stock option purchase plan was enforceable.
Texas Supreme Court Upholds Non-Compete Agreement Made by Existing Employee
The Texas Supreme Court has determined that, under the Texas Covenants Not to Compete Act, a covenant not to compete signed by a current employee in consideration for stock options is not unenforceable as a matter of law. The Court found the consideration is reasonably related to the company’s interest in protecting its goodwill, a business interest the Act recognizes as worthy of protection.
New Texas Non-Compete Decision Marks Further Shift Towards Enforceable Non-Compete Agreements
In its latest foray into non-compete jurisprudence, the Texas Supreme Court this week made it easier for employers seeking to restrict key employees from competing post-employment. In Marsh USA Inc. v. Cook, the Court held that a non-compete covenant contained in a stock option purchase plan was enforceable.
Texas Supreme Court Expands Enforceability of Covenants not to Compete
Executive Summary: The Texas Supreme Court delivered its eagerly anticipated opinion in Marsh USA, Inc. v. Cook on June 24, 2011. The issue in Marsh: whether the employee's exercise of stock options could constitute an interest sufficient to support his agreement not to compete. The Court held that it did, sparking new debate among practitioners about the extent to which employers may essentially buy employees' agreement to covenant not to compete.
The Door Continues to Close on Light: Texas Supreme Court Holds Stock Options Award to Valuable Employee Provides Necessary "Nexus" to Protection of Company's Goodwill
In 2006 and again in 2009, the Texas Supreme Court significantly departed from its 1994 decision in Light v. Centel Cellular Co., a case that confounded employers, practitioners, and courts for years with its highly technical and largely impractical interpretations of the Texas Covenant Not to Compete Act (TEX. BUS. & COM. CODE § 15.50 et seq.) ("the Act").
Noncompetes Become Even Easier to Enforce in Texas
Continuing to chip away at one of its prior decisions, the Texas Supreme Court just made it a bit easier to enforce restrictive covenants in Texas. In Marsh USA, Inc. v. Rex Cook, the Court rejected prior precedent as it considered whether an employer could enforce a non-compete signed by an employee in exchange for stock options. The answer in Texas is now a clear “Yes.” And there is room to conclude that cash may suffice as consideration to support a non-compete.
Texas Supreme Court makes noncompetes more enforceable
I blogged before on Marsh USA Inc., et al. v. Cook. The Texas Supreme Court heard argument on Sept. 16, 2010, and came out with its decision last Friday. By a five-vote majority, with one well-written, funny concurrence by Justice Don R. Willett, and three justices in dissent, the court wiped away decades of noncompete law in Texas, making such agreements more enforceable. How did the justices make it happen? By changing the consideration needed to support a noncompete.
Texas Supreme Court Further Relaxes Standards for Covenants Not to Compete
On June 24, the Texas Supreme Court further relaxed the requirements of covenants not to compete in Texas, moving further from the technical questions of contractual enforceability and emphasizing the core question of whether the scope of such covenants are reasonable. In Marsh USA Inc. v. Cook, the court held that an employer may obtain a covenant not to compete in return for an employee’s acceptance of a stock option grant, so long as the covenant is reasonable in time, scope and geography. Marsh USA Inc. v. Cook, No. 09-0558, Texas Supreme Court (June 24, 2011)
New Law Prevents Texas Employers from Prohibiting the Storage of Employees' Legal Firearms in their Locked Vehicles While at Work
Executive Summary: Effective September 1, 2011, Texas employers will no longer be able to prohibit employees from storing legal firearms in their locked vehicles while at work.
