Texas Supreme Court on Consideration and Covenants Not to Compete

This from Workplace Prof Blog:

The Texas Supreme Court last week changed its law about when suchnoncompetition agreements are supported by adequate consideration.  In Sheshunoff Management Services, Inc. v. Kenneth Johnson and Strunk & Associates,No. 03-1050 (Tx. Oct. 20, 2006), the court found that a unilateralpromise by the employer may support a covenant not to compete.  Morespecifically, the court held:

In this case we revisit the Court’s 1994 decision in Light v. Centel Cellular Co.and again consider the enforceability of covenants not to compete inthe context of at-will employment. The question today is whether anat-will employee who signs a non-compete covenant is bound by thatagreement if, at the time the agreement is made, the employer has nocorresponding enforceable obligation. Under Light, the answer to that question was always “no.” Today we modify our holding in Lightand hold that an at-will employee’s non-compete covenant becomesenforceable when the employer performs the promises it made in exchangefor the covenant. In so holding, we disagree with language in Lightstating that the Covenants Not to Compete Act requires the agreementcontaining the covenant to be enforceable the instant the agreement ismade.

[Meredith R. Miller]