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.
For years, Texas courts (including the Texas Supreme Court) have struggled to consistently define when a restrictive covenant is enforceable under the Texas Covenants Not to Compete Act. Various court opinions have stated that the Act says non-competes must be ancillary to an otherwise enforceable agreement at the time the agreement is made, and the otherwise enforceable agreement must “give rise” to the need for protection. What does that mean? It seems a lot of courts and lawyers have been asking the same question.
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