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Texas Law Update: Can I Make My Employee Sign a Non-Compete/Non-Solicit? (Part II)

September 29, 2016

For a non-compete/non-solicit to be enforceable under Texas law, it must be reasonable as to time, geographic area, and scope of activity.  Needless to say, it is a fact-specific inquiry and there is no one-size-fits-all answer.  Generally speaking, however, a restrictive covenant that does not bear some relation to the activities of the employee or that contains an industry-wide exclusion from subsequent employment is unreasonable.[1]  And as you will see, it is often necessary to look at all the restraints together to determine the reasonableness of a non-compete/non-solicit as a whole.… Read the rest

Texas Law Update: Can I Make My Employee Sign a Non-Compete/Non-Solicit? (Part I)

September 22, 2016

In our previous blog series “Covenant Not To Compete When Buying or Selling a Business,” we looked at several state laws governing covenants not to compete in the context of buying or selling a business.  This time, we will look at Texas law in depth, focusing on non-competition and non-solicitation covenants in the employment context.  As we mentioned before, a non-compete is enforceable in Texas if: (i) it is part of an otherwise enforceable agreement at the time the agreement is made; (iii) the restraint imposed is no greater than is necessary to protect the goodwill or other business interests at issue; and (ii) it is reasonable as to time, geographic area, and scope of activity to be restrained.… Read the rest

When Things Fall Apart: Business Partnership, Disagreement, and Dissolution (Part IV)

September 8, 2016

In Mizrahi v. Cohen,[1] a dentist and an optometrist formed a limited liability company for the purpose of the construction and operation of a mixed-use building in which they intended to set up their respective offices.  The two did not have an LLC agreement at the time they formed the LLC; it was executed a few months later when they purchased the land.  The lender required an LLC agreement and the attorney who represented both members at the closing drafted an LLC agreement. … Read the rest

When Things Fall Apart: Business Partnership, Disagreement, and Dissolution (Part III)

September 6, 2016

In Saunders v. Firtel, as in Cline v. Grelock, the two business partners were close friends.[1]  Firtel was the sole owner of a pharmaceutical sales corporation called Adco and Saunders was a sales representative for a medical supply company.  In 1986, the two decided to enter into a formal business relationship by allowing Saunders to obtain a 49% shareholder interest in Adco and to become an employee of the company.  Their written agreement provided that both would devote their time and efforts to the business and receive an equal combination of compensation and fringe benefits but also allowed Firtel to spend considerable time away and apart from the business. … Read the rest

When Things Fall Apart: Business Partnership, Disagreement, and Dissolution (Part I)

August 23, 2016

Here at The R. Shawn McBride Law Firm, PLLC, we write and speak frequently on business partnership, especially the 4 Ds (death, disability, divorce, and disagreement), which can have a major impact on businesses.  In our previous blog series on business divorce, for example, we talked about why business partners may disagree, describing some instances of conflict that business owners may encounter, and what they can do to protect themselves and the value of their business in the event of a business break-up and the attendant business disruption. … Read the rest

Covenant Not To Compete When Buying or Selling a Business (Part V)

July 21, 2016

Texas.

In Texas, as in many other states, a covenant not to compete is enforceable if: (i) it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made; (ii) it is reasonable as to time, geographic area, and scope of activity to be restrained; and (iii) the restraint imposed is no greater than is necessary to protect the goodwill or other business interests at issue.[1]  If the first two conditions are met but the restraint imposed is greater than necessary, Texas courts have the authority to reform the covenant to the extent necessary to make it reasonable as to time, geographic area, and scope of activity.… Read the rest

Covenant Not To Compete When Buying or Selling a Business (Part IV)

July 14, 2016

New York: Sale of Business and Good Will Beyond the Label.

In New York, non-competes used to be strongly disfavored by courts.[1]  Over time, however, courts came to recognize that there are situations in which it was not only desirable but essential to enforce non-competes.[2]  For example, in the context of a sale of a business along with its good will as a going concern, New York courts enforce a covenant not to compete because a seller of a business should not be allowed to recapture the good will of the very business he or she transferred for value by competing against the buyer.… Read the rest

Covenant Not To Compete When Buying or Selling a Business (Part III)

July 5, 2016

Florida: Reasonableness Matters.

In Florida, restrictive covenants are not prohibited, so long as they are reasonable in time, area, and line of business.[1]  In the context of the sale of a business or professional practice, Florida courts generally presume reasonable if the restriction is less than three years in duration and unreasonable if more than seven years in duration.  Additionally, the person seeking to enforce a restrictive covenant must: (i) show the existence of a legitimate business interest justifying the restriction, such as trade secrets, other valuable confidential business or professional information, substantial relationships with customers/patients/clients, goodwill, or special training; and (ii) prove that the restraint is reasonably  necessary to protect the legitimate business interest.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.