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TX case questions enforceability of non-compete agreement

If structured wisely, a non-compete agreement can result in a strong agreement that protects business interests while also being fair to employees. A failure to carefully draft the agreement increases the risks the document will not survive a legal challenge. A case provides an example.

The case, East Texas Copy Systems, Inc. v. Jason Player, involves a dispute over the reach of a non-compete agreement. In this case, Player resigned from his position with Copy Systems and began a competing business. Copy Systems attempted to bar Player from continuing his business by stating he was in violation of the non-compete agreement. Player countered, stating his actions were not in violation of the agreement.

The dispute centered on the following provision:

[I]f Player's employment with [Copy Systems] is terminated prior to two years from the date of this Agreement for any reason other than a for cause termination, this non-compete Agreement will no longer be binding.

According to the court, enforceability of the non-compete agreement required a for cause termination. Player did not lose his job in a for-cause situation. As such, the non-compete agreement was found not enforceable.

The court went on to explain that for the non-compete agreement to result in the protections Copy Systems intended, it should have included language that "the termination was at the instance of the employer." Since Player left his position of his own accord, such language would have extended the protections to apply in this situation.

This case provides an important lesson on the power of the language used to structure a non-compete agreement. Courts in Texas will carefully review this language. Businesses can mitigate the risk of a negative interpretation by seeking legal counsel experienced in these matters.

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