The Texas Supreme Court has once again ruled in favor of enforcing non-competition agreements. On April 17, 2009, the Court held 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 components of the Covenant Not to Compete Act are satisfied.” Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, No. 07-0490, 2009 WL 1028051, *1 (April 17, 2009). The other components of the Act involve whether the agreement’s terms are reasonable.

In Light v. Centel Cellular Co. of Tex., the Court interpreted the Act to require employers to promise to provide and actually to provide confidential information or trade secrets to employees “at the time the agreement is made.” 883 S.W.2d 642, 644-45 (Tex. 1994). This almost never happened and thus non-competes were difficult to enforce.

In 2006, the Court modified Light and held that the employer’s promise to provide confidential information or trade secrets is enforceable as long as the employer provides the information at some point during employment. Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 651 (Tex. 2006). Thus, non-competes became easier to enforce.

The Court has now gone further and held that the employer’s promise to provide confidential information or trade secrets within the non-compete need not be express; it may be implied. Fielding at *1. Thus, as long as a covenant not to compete is “ancillary to or part of an otherwise enforceable agreement,” (i.e., an employee’s non-disclosure agreement) and the nature of the contemplated employment will reasonably require the employer to furnish the employee with confidential information, then the employer impliedly promises to provide the information and the contract is enforceable. In such a situation, the only remaining issue is the reasonableness of the terms, i.e., whether the restrictions are reasonable in length of time, geography, and scope of activity restrained by the agreement. This ruling makes it more difficult for an employee to challenge the formation of a covenant not to compete under the Act.

It is also important to note that the Court held “confidential information” may include client-specific information that a client provides to the employer such as the “clients’ names, billing information, and pertinent tax and financial information.” Id. at *6.