Recently, a Texas judge ruled a non-compete authored by Cameron International Corporation was unenforceable due to its overbroad language. Steven Abbiss was an executive with Cameron and worked for the company for 25 years before being hired by its direct competitor, FMC Technologies Singapore Pte Ltd. Cameron sued Abbiss for allegedly violating the non-compete agreements he had signed in exchange for company stock and access to Cameron’s confidential information.
U.S. District Judge Nancy Atlas, who presided over the case, ruled that Cameron’s non-compete was too restrictive because it prohibited Mr. Abbiss from doing business with Cameron customers with whom he had no “material contact” while employed with Cameron, and it also prevented him from working with any business that was or could become a competitor of Cameron. Judge Atlas said that the confining language of the non-compete would effectively bar Mr. Abbiss from obtaining employment from any oil and gas company.
Judge Atlas was not completely unsympathetic to Cameron’s plight, noting that the company had a “legitimate business interest” in protecting its confidential information. The judge informed Cameron that they could still enforce the non-compete against Mr. Abbiss, provided they amended the covenants in the agreement so that they could be enforceable under the necessary state laws.
At one time, Texas law had ruled out many non-competes on the grounds that they couldn’t be enforced if their restrictions on competitors limited the ability or legal right of companies to engage in a common business. However, the state eventually passed laws allowing non-competes, as long as they met the following rules:
Texas courts would rather promote competition, not hinder it, so non-competes that may prohibit competition need to be carefully worded. The company will need to show both how not enforcing the non-compete would hurt its business, and how enforcing the non-compete would not cause undue the employee to be unable to do his or her job to the fullest extent and not encumber his or her ability to earn a living.
Non-competes are often considered necessary to many employers. They need to be certain that their confidential information and trade secrets will be protected, especially if their employees seek a new job through a competing company. But non-competes can be tricky in that they must be worded so that they will be enforceable in court. Garcia-Martin & Martin, P.C., a business and employment law firm located in Sugar Land, TX, has had years of experience drafting non-competes and practicing in other areas of business law. Reach out to us today for help.
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