Quick, can you name the number one song of 2014?
I’ll help you out. It was “Happy” by Pharrell Williams.
But to be honest, I was not so happy in early 2014. I had just lost my job working for a Houston law firm. Fortunately, I had a good paying client who was being sued for violation of a non-compete. And the rest is history.
At the time I’m writing this (the end of 2024), my Texas law practice has focused on the defense of lawsuits involving claims for violation of non-competes and/or alleged misappropriation of “trade secrets” for about ten years.
I put scare quotes around “trade secrets,” because very rarely have my cases involved any actual trade secrets. But that’s an issue for another post.
A little more background on me: From 1997 through 2014, I worked on a wide variety of business litigation matters in Texas. Some of those matters involved non-competes, and I was generally familiar with Texas non-compete law, but non-compete litigation was not my specialty.
Starting in 2014, my practice began to focus on litigation involving non-compete and trade secret claims. Today, my firm focuses almost entirely on defense of non-compete and trade secret litigation, plus providing “pre-litigation” advice to clients seeking to avoid such litigation. That means we’re representing either the departing employee, the company hiring the departing employee, or sometimes both.
After about ten years of doing that, I’ve learned some practical lessons. I could charge my hourly rate to teach these lessons, but I’ve decided to share them with the world for free. Hey, business has been good, so why not.
1. Clients usually ask the wrong questions
Clients typically come to me with questions they want answered. Sometimes the client will even have very specific questions, like “what is your success rate in defeating injunctions in the custom-built air conditioning hose industry?”
Usually these are the wrong questions. But that’s ok, because part of the value I provide is knowing the right questions.
Clients will often ask me “is my non-compete enforceable?”
It’s understandable they would ask that. I asked the same question when I put out my first YouTube video as That Non-Compete Lawyer. The question was, “Is My Texas Non-Compete Enforceable?”
In that video I outlined how to analyze enforceability of a non-compete under Texas law, but at the end of the video I emphasized that it can cost a lot of money in legal fees to get the answer from a court. More about that later.
I was already hinting at the point that whether the client’s non-compete is enforceable as written, in the abstract, is not really that important.
Don’t get me wrong, it is a relevant issue. But after ten years, I’ve learned it’s not as important as clients usually think it is.
There are a lot of reasons for this, but let’s just say the more important thing is the practical question of what is likely to happen if your former employer tries to enforce the non-compete?
That brings me to the next lesson.
2. The most immediate risk to the employee is that your new employer will get scared and fold.
Clients also tend to ask “what am I allowed to do under this non-compete?”
Again, it’s totally understandable they would ask this, but as a practical matter, it’s the wrong question. The more pertinent question is “what is likely to happen if I go to work for a competitor and my former employer makes a stink about my non-compete?”
In most cases, that question will be prompted by the former employer or its lawyer sending the employee a demand letter. Sometimes they will copy the employee’s new employer on the letter. Sometimes they will call it a “cease and desist” letter, because they think that sounds more serious. I prefer the technical term “nastygram.”
The effects of a nastygram vary widely. The stiffness of the subsequent employer’s spine is usually the determining factor.
Some subsequent employers have spines like noodles. The minute they hear the words “non-compete” and “lawsuit,” they’ll drop the employee like a hot potato. (I know, mixed metaphors.)
Others with stiffer spines will take the opposite approach. Their response to a nastygram will be more like “tell that former employer they can go f*** themselves, we’ll hire whoever we want to hire, and we can pay lawyers too.”
But most of the time, the new employer will be somewhere in the middle. They will back up the new employee they just hired, to a point.
The important thing for the employee to understand is that you have little, if any, control over this decision. And if the subsequent employer decides to drop you, there’s virtually nothing I can do about that as your lawyer. I can argue Texas case law on non-competes backwards and forwards, but if the company that hired you decides to back out, I can’t stop them.
Usually, the best you can do as an employee is to discuss the issue with the new employer ahead of time. They are not going to give you any formal written commitment, but you can at least try to get a general sense of whether they will back you up if there’s a lawsuit, or a threat of a lawsuit. That informal commitment won’t be binding, but it’s better than nothing.
Ok, let’s say you have that discussion and the subsequent employer doesn’t immediately fold under pressure. What then?
3. The next most immediate risk to the employee is drawing a judge who likes non-competes.
My firm will often get hired by the employee at the nastygram stage. Usually, in those situations our goal is to try to work something out and avoid a lawsuit. That could mean providing assurances the employee didn’t take any confidential documents, agreeing the employee won’t do business with certain customers, or anything else needed to resolve the dispute.
If that doesn’t work out, and there’s a lawsuit, clients will usually want to know if the law is on their side.
Again, that’s an understandable and not entirely irrelevant question.
But if ten years of litigation practice has taught me anything, it’s that my opinion on what “the law” is doesn’t mean much. That’s because I’m not the one who gets to decide.
No, a judge will decide, of course. (Or in some cases it could be an arbitrator, but let’s go with “judge” for simplicity.)
More specifically, a judge will decide whether to grant an injunction. An injunction is essentially a court order telling you not to do something; there is also a short-term form of injunction called a “temporary restraining order.” Your lawyer can explain the procedural nuances.
The injunction could say, for example, that the employee is not allowed to work for the subsequent employer until the employee’s non-compete expires. Or it could just say the employee is not allowed to use the employer’s confidential information, or that the employee can’t do business with the customers she serviced when working for the first employer. Or anything else the judge thinks is reasonable.
In one case, the judge granted an injunction putting the ten best customers off limits. Why ten? Is there something in the Law of Non-Competes that says ten is a reasonable number of customers to restrict?
No, of course not. It’s just a number the judge picked because it seemed fair.
The practical lesson: The injunction can say whatever the judge wants it to say. And usually that will be whatever the judge thinks is fair under the circumstances.
Here’s what else ten years of focusing on departing employee litigation has taught me about the judge:
- You should not assume the judge understands the law that applies to your case.
- If the judge does understand the law that applies, you should not assume the judge will feel bound to follow it.
- The judge will come to the case with a certain worldview that largely determines how the judge feels about non-competes in general.
- The specific facts of your case do matter to some extent (more about this later), but the most important factor is how the judge feels about non-competes in general.
Furthermore, how the judge feels about non-competes is often hard to predict, even after you know which judge was assigned to your case.
The best prediction model I can give you is a bell curve. On the left end are the cases where the judge denies an injunction entirely. On the right side of the curve, you have the cases where the judge completely bars the employee for working for the new employer.
But most cases are in the middle, where the judge will grant a more limited injunction that allows the employee to continue working for the second employer, but with some limitations.
The thing to understand is that while the extreme results are less likely, your result could be anywhere on the curve. I’ve had results on both ends.
For example, I had a case in Tarrant County where the judge entered an order that literally put my clients out of their jobs and effectively required them to change careers.
I won’t say who the judge was (editor’s note: it was Judge Josh Burgess), but when I cited a whole line of Texas cases holding that the non-compete at issue was too broad, his response was that those were not Fort Worth cases. What he was really saying was that he didn’t care what the case law said, if you signed a non-compete you’re stuck with it.
So my clients were hit with an onerous injunction. (To add insult to injury, Tarrant County was not even the proper venue for the lawsuit in the first place, but I digress.)
Can you appeal that decision? In theory, yes. But in most cases an appeal will do you no good, because (1) you will probably lose the appeal (for reasons), and (2) in most cases the appeal will take so long that it won’t do you any good as a practical matter.
The bottom line: the biggest factor is who the judge is, and what that judge thinks about non-competes generally.
Notice I said biggest factor, not the only factor. The employee’s conduct is also an important factor, for better or worse. In other words, your conduct can shift the bell curve in either direction.
4. A “clean exit” is the best way for an employee to reduce the risk of an injunction.
If you’re the departing employee, you can’t control how your new employer will react to the threat of a lawsuit, and if there’s a lawsuit you can’t control who the judge will be, but you can control your own actions. And your actions can have a significant impact on the judge’s decision.
The best thing you can do to reduce the risk of a decision against you is to have a “clean exit.”
For an example of a messy exit, read the opinion in Winsupply E. Houston v. Blackmon, No. 4:21-cv-01387, 2021 WL 5504756 (S.D. Tex. Nov. 22, 2021). That was a difficult case for the defense, because the key employee who left the plaintiff was not careful to have a clean exit.
The lawyer for the company that hired the employee described her departure as a “messy transition.” U.S. District Judge Eskridge, an astute judge and all-around decent guy, rejected that characterization as too charitable to the employee. See id. at *7. I know this well because I was the lawyer who argued it was just a “messy transition.”
Anyway, a messy exit is not what you want if you’re the employee, or the company hiring the employee. You want a clean exit.
But how?
First, you need to understand that everything you do on a computer or phone or other electronic device leaves a trail, so if your exit is not clean, the company will find out.
Imagination is the only limit to the bad things an employee can do on the way out, but let me give you some examples of common things you should not do if you are an employee who wants a clean exit:
- Once you’ve decided you’re leaving, don’t start doing anything unusual like accessing or downloading confidential company documents without a genuine work-related reason.
- Don’t transfer, email, copy, download, or print company documents and take them with you when you leave.
- Don’t copy company documents from your computer to an external device like a USB drive or portable hard drive unless absolutely necessary to doing your job (and in most cases, it won’t be absolutely necessary, will it?)
- For the love of God, please don’t email company documents from a company email address to a personal email address even if it’s for a legitimate work reason. Just don’t do this.
- Don’t hold on to company documents, in electronic or paper form, after leaving. Figure out how you are going to return these documents to the company. (This can be tricky, so get a lawyer to help you with this.)
- Don’t “wipe” your computer or devices or delete documents to try to cover your tracks. Understand that attempts to cover your tracks will leave their own tracks.
- Don’t sign an agreement with a customer or client on behalf of your new company or a new employer while you’re still employed by the first company.
- Don’t tell clients or customers, or potential clients or customers, that you’re leaving or planning to leave. If you must tell them, wait until after your employment with the company ends.
- While still employed by the first employer, don’t send a client or customer’s business to someone else.
- After you leave the first employer, don’t communicate with the employer’s clients, customers, or employees without first consulting with a lawyer and making a specific plan on what you should and shouldn’t do.
This is not an exhaustive list, but you get the idea. The way people usually go wrong is taking or keeping company documents after leaving, soliciting company customers or employees while still employed, or both.
The problem with a messy exit is that it significantly increases the likelihood that a judge will think it’s fair to enter an onerous injunction against you. It’s just human nature. I can argue the case law to the judge all day, but if you did stuff that looks sneaky and underhanded to the judge, it will impact how the judge sees the case.
Luckily, there was a happy ending to the “messy transition” case, because we successfully persuaded the judge the plaintiff had failed to show the harm at issue was “irreparable.” See id. at *8-9. But you can’t count on that.
5. Money changes everything.
Speaking of counting, if you get sued for breaking a non-compete, get ready to start counting the dollars you will spend on legal fees.
How much will have to spend?
I’m tempted to say “if you have to ask, then you can’t afford it,” but that’s a little too snarky.
The answer is that it depends in large part on the law firm you hire. If you hire a BigLaw firm, look out. Don’t be surprised if the fees get into six figures within a few months.
Don’t get me wrong, I’m not bashing the big firms. Many of the best lawyers are in BigLaw. (I cover this in depth in Should Clients Pay a Premium for Big-Name Law Firms?) But they’re in BigLaw because that’s where the big money is. And they wouldn’t make big money if the bills were not big.
A solo or small firm lawyer will usually cost less. As a rule of thumb, you should be prepared to spend at least $10,000 for the initial temporary injunction stage of a non-compete lawsuit. I explain at my video How Much Does a Texas Non-Compete Lawsuit Cost?
Now let me be blunt for a moment. If writing a check for $10,000 is a financial hardship for you, then you should probably not be playing at this table. That may sound harsh, but it’s the reality.
Truth is, if you can’t afford that, then your former employer will be in a position to try to bully you into submission, because they can afford to pay lawyers and you can’t.
And believe me, they know this. So if you expect to be in a non-compete dispute, start building up your rainy day fund now.
That brings me to the number one song of 2024. “Lose Control” by Teddy Swims. That’s what you don’t want.
The bottom line is that if you want to have any control over your destiny, you’re gonna need gas in the tank and money in the bank.
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Zach Wolfe ([email protected]) is a Texas trial lawyer who handles non-compete and trade secret litigation at Zach Wolfe Law Firm (zachwolfelaw.com). Thomson Reuters has named him a Texas “Super Lawyer”® for Business Litigation every year since 2020.
These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.
