Ever since the Texas Supreme Court's confusing 1994 opinion in Light v. Centel Cellular Co., courts have struggled to assess in a coherent and consistent manner whether a noncompete, executed in connection with an at-will employment relationship, is “ancillary to an otherwise enforceable agreement” under the Texas Business and Commerce Code. Thankfully, over time, the court has refined the threshold test for enforceability of noncompetes.

But what about the threshold enforceability of noncompetes and confidentiality agreements that are executed in the middle of an employment relationship? This article addresses the state of the law on these agreements and how employers can bolster the enforceability of these agreements.

The Threshold Enforceability

In Light v. Centel Cellular Co., the Texas Supreme Court addressed, for the first time, the enforceability of noncompetes in the context of at-will employment relationships. The court held, in an overly complicated and obtuse test, that an at-will employment relationship may satisfy the prerequisite of an “otherwise enforceable agreement” so long as the “consideration given by the employer in the otherwise enforceable agreement … give[s] rise to the employer's interest in restraining the employee from competing,” and “the covenant must be designed to enforce the employee's consideration or return promise in the otherwise enforceable agreement.” In Alex Sheshunoff Management Services, L.P. v. Johnson in 2006, the court refined its decision from Light and held that an employee's unilateral promise not to disclose the employer's confidential information was an “otherwise enforceable agreement” so long as the employer actually disclosed the confidential information that it had promised to disclose.