Texas 2009 - 81st Regular

Texas Senate Bill SB2441 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	81R14085 DAK-D
2	2	By: Uresti S.B. No. 2441
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the enforceability of covenants not to compete and to
8	8	certain procedures and remedies in actions to enforce those
9	9	covenants.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Subchapter E, Chapter 15, Business & Commerce
12	12	Code, is amended to read as follows:
13	13	SUBCHAPTER E. COVENANTS NOT TO COMPETE
14	14	Sec. 15.50. SHORT TITLE. This subchapter may be cited as
15	15	the Texas Covenant Not to Compete Act.
16	16	Sec. 15.51. POLICY AND PURPOSE. It is the public policy of
17	17	this state and the purpose of this subchapter to:
18	18	(1) provide a stable, competitive business
19	19	environment for the residents of this state;
20	20	(2) provide certainty and uniformity regarding the
21	21	enforceability of covenants not to compete; and
22	22	(3) encourage employers to share confidential,
23	23	proprietary information and other protectable business interests
24	24	with employees in furtherance of their common purpose, but to
25	25	prevent employers from taking unfair advantage of an employee and
26	26	impairing an employee's personal freedoms and economic mobility.
27	27	Sec. 15.52. DEFINITIONS. In this subchapter:
28	28	(1) "Covenant not to compete" or "covenant" means any
29	29	agreement, regardless of form, that restricts competition. The
30	30	term does not mean an agreement:
31	31	(A) not to disclose or use trade secrets or
32	32	confidential information of the promisee;
33	33	(B) not to solicit employees of the promisee;
34	34	(C) to resign or cease using staff or medical
35	35	privileges acquired with the assistance of the promisee; or
36	36	(D) not to cause a reduction of staff of the
37	37	promisee.
38	38	(2) "Physician" means a person licensed as a physician
39	39	by the Texas Medical Board.
40	40	Sec. 15.53. CRITERIA FOR ENFORCEABILITY OF COVENANTS NOT TO
41	41	COMPETE. (a) Notwithstanding Section 15.05 [of this code], and
42	42	subject to any applicable provision of Subsection (b) or (c), a
43	43	covenant not to compete is enforceable if it is [ancillary to or]
44	44	part of or supported by an otherwise enforceable agreement only [at
45	45	the time the agreement is made] to the extent that it contains
46	46	limitations as to time, geographical area, and scope of activity to
47	47	be restrained that are reasonable and do not impose a greater
48	48	restraint than is necessary to protect the goodwill or other
49	49	business interest of the promisee.
50	50	(b) In addition to the requirements of Subsection (a), a [A]
51	51	covenant not to compete or otherwise enforceable agreement is
52	52	enforceable against a [person licensed as a] physician [by the
53	53	Texas State Board of Medical Examiners] if such covenant or
54	54	agreement complies with the following requirements:
55	55	(1) the covenant or agreement must provide [:
56	56	[(A) not deny] the physician, on request, access
57	57	to a list of [his] patients whom the physician [he] had seen or
58	58	treated within the last [one] year of [termination of the contract
59	59	or] employment with the promisee;
60	60	(2) the covenant or agreement must [(B)] provide, on
61	61	written authorization of the patient, access to medical records of
62	62	the physician's patients [upon authorization of the patient] and
63	63	any copies of medical records for a reasonable fee as established by
64	64	the Texas Medical Board [State Board of Medical Examiners] under
65	65	Section 159.008, Occupations Code; and
66	66	[(C) provide that any access to a list of
67	67	patients or to patients' medical records after termination of the
68	68	contract or employment shall not require such list or records to be
69	69	provided in a format different than that by which such records are
70	70	maintained except by mutual consent of the parties to the contract;
71	71	[(2) the covenant must provide for a buy out of the
72	72	covenant by the physician at a reasonable price or, at the option of
73	73	either party, as determined by a mutually agreed upon arbitrator
74	74	or, in the case of an inability to agree, an arbitrator of the court
75	75	whose decision shall be binding on the parties; and]
76	76	(3) the covenant or agreement must provide that the
77	77	physician will not be prohibited from providing continuing care and
78	78	treatment to a specific patient or patients during the course of an
79	79	acute illness even after the contract or employment has been
80	80	terminated.
81	81	(c) A covenant not to compete with a physician must provide
82	82	for a buyout of the covenant by the physician at a reasonable price
83	83	in light of the goodwill or other business interests of the promisee
84	84	that are sought to be protected by the covenant. The buyout price
85	85	must be provided for in the covenant by stating either an amount, a
86	86	formula by which the amount may be determined, or a stipulation that
87	87	the determination of the amount will be submitted to an arbitrator
88	88	whose decision is conclusive and binding on the parties and the
89	89	court and not subject to reformation as provided by Section
90	90	15.54(c).
91	91	(d) Unless the covenant not to compete or the otherwise
92	92	enforceable agreement with a physician specifically designates the
93	93	format in which a patient list or patients' medical records will be
94	94	provided, the physician's access to a list of patients or to
95	95	patients' medical records after termination of the contract or
96	96	employment shall be provided in the format in which the records are
97	97	maintained.
98	98	Sec. 15.54 [15.51]. PROCEDURES AND REMEDIES IN ACTIONS TO
99	99	ENFORCE COVENANTS NOT TO COMPETE. (a) Except as provided by
100	100	Subsections [in Subsection] (c) and (d) [of this section], a court
101	101	may award the promisee under a covenant not to compete damages,
102	102	injunctive relief, or both damages and injunctive relief for a
103	103	breach by the promisor of the covenant.
104	104	(b) If the primary purpose of the otherwise enforceable
105	105	agreement that supports the covenant, or of [to] which the covenant
106	106	is a part, [ancillary] is to obligate the promisor to render
107	107	personal services, for a term or at will, the promisee has the
108	108	burden of establishing that the covenant meets the criteria
109	109	specified by Section 15.53 [15.50 of this code]. If the agreement
110	110	has a different primary purpose, the promisor has the burden of
111	111	establishing that the covenant does not meet those criteria. For
112	112	the purposes of this subsection, the "burden of establishing" a
113	113	fact means the burden of persuading the triers of fact that the
114	114	existence of the fact is more probable than its nonexistence.
115	115	(c) If the covenant is found to be [ancillary to or part of
116	116	an otherwise] enforceable under Section 15.53 [agreement] but, as
117	117	written, contains limitations as to time, geographical area, or
118	118	scope of activity [to be restrained] that are not reasonable or
119	119	[and] impose a greater restraint than is necessary to protect the
120	120	goodwill or other business interest of the promisee, the promisee
121	121	of the covenant may, in writing, unilaterally expressly modify or
122	122	amend the limitations as to time, geographical area, or scope of
123	123	activity to make them reasonable and not impose a greater restraint
124	124	than is necessary to protect the goodwill or other business
125	125	interest of the promisee and may seek to have the covenant enforced
126	126	as modified or amended. An election to modify or amend
127	127	automatically reduces the scope of the covenant to the limitations
128	128	sought to be enforced by the promisee and must be made at or before
129	129	the time any claim is made in a suit to enforce the covenant. If a
130	130	court enforces the covenant as modified or amended and to the extent
131	131	sought to be enforced by the promisee as to time, geographical area,
132	132	or scope of activity, the court may award the promisee damages and
133	133	injunctive relief. If the covenant is found to be enforceable under
134	134	Section 15.53 but the promisee of the covenant seeks to enforce
135	135	limitations as to time, geographical area, or scope of activity
136	136	that are not reasonable and impose a greater restraint than is
137	137	necessary to protect the goodwill or other business interest of the
138	138	promisee, the court shall reform the covenant to the extent
139	139	necessary to cause the limitations contained in the covenant as to
140	140	time, geographical area, and scope of activity to be restrained so
141	141	as to be reasonable and to impose a restraint that is not greater
142	142	than necessary to protect the goodwill or other business interest
143	143	of the promisee and shall enforce the covenant as reformed. If the
144	144	court reforms the covenant, [except that] the court may award the
145	145	promisee injunctive relief and damages for breach of the covenant
146	146	after it was reformed by the court or arbitrator but may not award
147	147	[the promisee] damages for a breach of the covenant before its
148	148	reformation [and the relief granted to the promisee shall be
149	149	limited to injunctive relief].
150	150	(d) The final trial in any case involving the enforceability
151	151	of a covenant not to compete shall be held expeditiously and shall
152	152	take precedence over other matters, except criminal and family law
153	153	matters. A promisee of a covenant not to compete that is
154	154	enforceable under Section 15.53 is entitled to temporary injunctive
155	155	relief without the necessity of showing irreparable harm or an
156	156	inadequate remedy at law. A promisee of a covenant not to compete
157	157	is entitled to temporary injunctive relief during the pendency of
158	158	any suit if the final hearing is set later than six months after the
159	159	date the original suit is filed.
160	160	(e) A promisee of a covenant not to compete that is
161	161	enforceable under Section 15.53 is entitled to have the period of
162	162	the restrictions extended by the court for a period equivalent to
163	163	the period of any breach of the covenant by the promisor.
164	164	(f) A court shall award a party that prevails in a suit under
165	165	this chapter [If the primary purpose of the agreement to which the
166	166	covenant is ancillary is to obligate the promisor to render
167	167	personal services, the promisor establishes that the promisee knew
168	168	at the time of the execution of the agreement that the covenant did
169	169	not contain limitations as to time, geographical area, and scope of
170	170	activity to be restrained that were reasonable and the limitations
171	171	imposed a greater restraint than necessary to protect the goodwill
172	172	or other business interest of the promisee, and the promisee sought
173	173	to enforce the covenant to a greater extent than was necessary to
174	174	protect the goodwill or other business interest of the promisee,
175	175	the] court [may award the promisor the] costs and [, including]
176	176	reasonable and necessary attorney's fees, except that a promisee is
177	177	not entitled to court costs and attorney's fees if [actually and
178	178	reasonably incurred by the promisor in defending the action to
179	179	enforce] the covenant is reformed by a court under Subsection (c).
180	180	Sec. 15.55 [15.52]. PREEMPTION OF OTHER LAW. (a) The
181	181	criteria for enforceability of a covenant not to compete provided
182	182	by Section 15.53 [15.50 of this code] and the procedures and
183	183	remedies in an action to enforce a covenant not to compete provided
184	184	by Section 15.54 [15.51 of this code] are exclusive and preempt any
185	185	other criteria for enforceability of a covenant not to compete or
186	186	procedures and remedies in an action, regardless of form, to
187	187	determine the enforceability or to enforce a covenant not to
188	188	compete under common law or otherwise.
189	189	(b) If the primary purpose of the otherwise enforceable
190	190	agreement that supports the covenant or of which the covenant is a
191	191	part is to obligate the promisor to render personal services, for a
192	192	term or at will, and the covenant seeks to restrict the promisee
193	193	from competing in this state, any agreement that purports to select
194	194	or elect the laws of another jurisdiction to apply or govern in any
195	195	action to determine the enforceability of or to enforce a covenant
196	196	not to compete is void.
197	197	SECTION 2. The change in law made by this Act to Subchapter
198	198	E, Chapter 15, Business & Commerce Code, applies only to an action
199	199	to enforce a covenant not to compete filed on or after the effective
200	200	date of this Act. An action filed before the effective date of this
201	201	Act, including an action filed in which a party is joined or
202	202	designated after that date, is governed by the law in effect
203	203	immediately before the effective date of this Act, and the former
204	204	law is continued in effect for that purpose.
205	205	SECTION 3. This Act takes effect September 1, 2009.