Dallas Court Says Employee’s Claim for Attorney Fees in Suit by Employer to Enforce Covenant-Not-to-Compete Should Not Have Been Dismissed

Covenants not to compete and similar contractual agreements are becoming more common in Texas and elsewhere in the nation. Generally speaking, these agreements are enforceable so long as they are reasonable in scope and duration. However, a Dallas employment covenant lawsuit seeking to enforce such an agreement may involve multiple issues as to the enforceability of the agreement and the parties’ respective rights and responsibilities thereunder.

Facts of the Case

In a recent appellate case arising in the 95th Judicial District Court of Dallas County, Texas, the plaintiff was a business that hired the defendant coach to provide training for athletes. The parties’ relationship was put into writing in the form of an employment contract, which included a non-compete agreement. About three years later, the defendant voluntarily terminated his relationship with the plaintiff but continued in the same line of work. A few months after that, the plaintiff filed suit against the plaintiff, asserting a claim for breach of contract and seeking an injunction preventing the defendant from competing with the defendant or attempting to solicit business from the defendant’s customers.

Thereafter, the plaintiff filed a notice of nonsuit pursuant to Texas Rule of Civil Procedure 162, and the district court dismissed the plaintiff’s claims without prejudice. The defendant, who had asked for attorney fees in his answer, filed a motion asking the trial court to vacate its judgment dismissing “all claims.” According to the defendant, the court had been overly broad in dismissing his pending claim for attorney fees under the Texas Non-Compete Act and/or the Declaratory Judgment Act. The trial court denied the relief sought by the defendant, and he appealed.

The Court’s Decision

The Court of Appeals for the Fifth District of Texas at Dallas affirmed as to the dismissal of the plaintiff’s claims against the defendant, but it reversed the lower tribunal’s ruling as to the defendant’s claim against the plaintiff for attorney’s fees, thus remanding the case to the lower tribunal for further proceedings on that issue.

According to the court, both the plaintiff and the trial court were on notice that attorney’s fees could potentially be available to the defendant in the plaintiff’s suit to enforce the employment contract. After all, the court reasoned, the defendant did raise the issue as an affirmative defense in his answer. Thus, the trial court committed reversible error in dismissing the defendant’s claim for attorney fees along with the plaintiff’s complaint against the defendant.

Consult a Dallas Employment Law Attorney

Employee relations can be very challenging – not only during the pre-employment and employment phases but also after a worker has moved on to a different position with another company (or started his or her own business). At Key Harrington Barnes, our hardworking Dallas employment law attorneys are here to help your business deal with the myriad issues that can arise in the employer-employee relationship. For an appointment to discuss your concerns about a legal issue in this area of the law, call us at 214-615-7925.

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