Texas Court Enforces Two-Year Non-Compete; Suggests Restrictions up to Five Years May be Reasonable
A U.S. District Judge in the Northern District of Texas has issued a preliminary injunction to enforce a non-compete agreement in Brink’s, Inc. v. Patrick, Case No. 3:14-cv-775-B (N.D. Tex., 6/26/14). The opinion adheres to well-established Texas law principles regarding the reasonableness of the limitations contained in non-compete agreements.
Brink’s provides secure transportation for currency, negotiable instruments, and other valuables. Robert Greco worked for Brink’s as the Area Director for the Central Region. He worked out of Brink’s Chicago office (where he had previously been Branch Manager), but had responsibility over operations in several Midwest states and Texas.
Around the time Brink’s promoted Greco to Area Director, Greco signed a Confidentiality and Non-Competition Agreement. Greco agreed not to “provide or perform services similar to those provided or performed by the Company within the Territory (as defined below) for any Competing Business” for a period of two years after the termination of his employment. The Agreement defined “Territory” as:
[T]he geographic area serviced by the Company office(s) to which I was last assigned or if my employment in such office(s) was for a period of less than two (2) years, the geographic area serviced by each Company office(s) to which I was assigned within the two (2) years preceding the termination of my employment with the Company.
Greco resigned as Area Director to perform similar duties in the Chicago area for one of Brink’s main competitors. Brink’s filed suit and requested a preliminary injunction restricting Greco from performing services for the competitor that were similar to those he provided Brink’s in the territories he worked for Brink’s.
When evaluating the reasonableness of the limitations in the Agreement, the Court relied on multiple “rules of thumb” under Texas law to conclude that Brink’s was likely to succeed on the merits. First, the Court held that the geographical restriction was likely reasonable because it was limited to the same territories where Greco worked for Brink’s. Second, the Court held that the scope of activity restriction was likely reasonable because it was not an industry-wide ban, but only prevented Greco from working for competitors in a role that was similar to his role at Brink’s. Third, the Court found that the two-year restriction was not an obstacle to a preliminary injunction because “Texas courts have generally upheld non-compete periods ranging from two to five years as reasonable.” The opinion is particularly noteworthy for this latter statement, which is generalization of Texas law that many would debate. Employers seeking to enforce agreements with non-compete periods lasting two years or more will certainly want to keep this opinion in mind.
The opinion underscores the importance of narrowly drafted non-compete agreements. The Court emphasized that the Agreement did not prevent Greco from competing outside of certain geographical areas or from working for a competitor in a role that was different from his role at Brink’s. The Court’s analysis of reasonableness of the geographic limitation and the scope of activity to be restricted comports with how Texas courts typically evaluate the reasonableness of a non-compete agreement.