New Texas Non-Compete Decision Marks Further Shift Towards Enforceable Non-Compete Agreements

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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.

Prior to the Supreme Court’s decision in Marsh, Texas courts have required that the promise not to compete be made in connection with some other agreement between the employee and employer – an agreement which involved the very interests the employer wanted to protect with the restrictive covenant. In practice, this usually meant that the non-compete was enforceable when the employer agreed to provide confidential information or trade secrets, and in exchange the employee promised to keep such material confidential. Under the Supreme Court’s recent cases, that was enough to support a non-compete/non-solicitation agreement (as long as the material was really confidential and was actually given to the employee after the non-compete was signed). But now, other employee-employer agreements will support enforceable restrictive covenants.

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