Summary
The Supreme Court of Texas held that a covenant not to compete in an at-will employment agreement was enforceable where the nature of the employee's work reasonably required the employer to provide confidential information, creating an implied promise to provide that information. The court concluded that the employer's actual provision of confidential information satisfied the requirements of the Texas Covenants Not to Compete Act. The court reversed the court of appeals and rendered judgment that the employee take nothing, declining to reach the attorney-fee preemption and severability issues.
Topics
Practice areas
Questions Presented
- Whether a client-purchase provision in an at-will employment agreement is an enforceable covenant not to compete when the employee expressly promises not to disclose confidential information but the employer makes no express promise to provide confidential information.
- Whether Fielding was entitled to attorney's fees under the attorney-fees provision in his employment agreement after the client-purchase provision was held enforceable.
Holdings
- When the nature of the employment reasonably requires the employer to provide confidential information for the employee to perform the contemplated job duties, the employer impliedly promises to provide that confidential information. The agreement may become an otherwise enforceable agreement when the employer performs that promise by actually providing the information.
- The client-purchase provision was ancillary to or part of the otherwise enforceable employment agreement because the employer's provision of confidential information gave rise to its interest in restraining competition and the employee's nondisclosure promise was the return promise the provision was designed to enforce.
- Fielding was not entitled to attorney's fees under the employment agreement because, after the client-purchase provision was held enforceable, he was not the prevailing party.
Key quotations
“We hold that if the nature of the employment for which the employee is hired will reasonably require the employer to provide confidential information to the employee for the employee to accomplish the contemplated job duties, then the employer impliedly promises to provide confidential information and the covenant is enforceable so long as the other requirements of the Covenant Not to Compete Act are satisfied.” (846)
“When the nature of the work the employee is hired to perform requires confidential information to be provided for the work to be performed by the employee, the employer impliedly promises confidential information will be provided.” (850)
“Therefore, the client purchase provision was "ancillary to or part of" the otherwise enforceable agreement when the otherwise enforceable contract was made, and the client purchase provision is enforceable under the Act.” (852)
Factual background
Mann Frankfort, an accounting and consulting firm, rehired certified public accountant Brendan Fielding in 1995 as a senior manager in its Tax Department under an at-will employment agreement. The agreement required Fielding not to disclose or use confidential information and contained a client-purchase provision requiring him to purchase the firm's business associated with any client for whom he performed accounting services within one year after termination. Fielding later resigned, opened an accounting firm, and sought a declaration that the provision was unenforceable. The summary-judgment evidence established that performing Fielding's duties required access to confidential client tax and financial information and that Mann Frankfort actually provided him such information.
Procedural history
The trial court held the client-purchase provisions unenforceable and denied Fielding attorney's fees under the Uniform Declaratory Judgments Act and his employment agreement. On appeal, the court of appeals affirmed the denial of UDJA fees but held that the employment-agreement provision was severable and that Fielding was entitled to contractual attorney's fees. The Texas Supreme Court reversed, held the employment-agreement client-purchase provision enforceable, and rendered judgment that Fielding take nothing.