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Blimey! England and Texas Agree: Employers Cannot "Buy" a Non-Compete Restriction. Norway Thinks That Is “Totally Texas.”

A recent decision by the English High Court in Bartholomews Agri Food Limited v. Thornton, [2016] EWHC 648 (QB) (Eng.), serves as a good reminder that employers with employees in different jurisdictions need to understand what amounts to adequate consideration for an employment non-compete in each of those jurisdictions. For example, what works in England might not work in Texas. And what works in Texas might not work in Norway. 

In the Bartholomews case, the High Court considered a provision in an employment contract that provided for the employee to be paid during the post-termination non-compete period provided that he continued to comply with the restrictions.  The High Court held that, under English law, employers cannot “buy” restrictions in this way and that such payments did not help with enforceability of a restriction that was vague and overly broad. Although some consideration for a non-compete is required under English law, the greater emphasis is on ensuring that the restrictions are drafted narrowly and no broader than reasonably necessary to protect an employer’s interests.

The decision stands in contrast to the approach of other jurisdictions in which payment during the restricted period is required. For example, at the beginning of 2016, Norway amended its Working Environment Act to clarify the law on non-competition clauses. The amendments codified the existing common law principle that an employer must compensate an employee during any period that a non-compete is enforced.

Readers who are familiar with Texas non-compete law will know that Texas has a peculiar and specific approach to the consideration necessary to support an enforceable non-compete. Although it remains an area of significant litigation, the general rule in Texas is that, as in England, it is not possible to “buy” a non-compete. Traditionally, Texas courts have held that valid consideration is restricted to the provision of new confidential information or specialized training or, more recently, equity-based compensation that relates to the good will of the business. Employers that are not familiar with Texas law often trip up over these requirements and end up with unenforceable restrictions. 

When drafting non-competition and non-solicitation provisions in employment agreements, a one-size-fits-all approach does not work.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.