Texas Appellate Court Voids, As Contrary to Fundamental Texas Law, Incentive Compensation Contract Imposing A Substantial Penalty For Post-Employment Competition With The Ex-Employer

Under Texas law, a restraint on competition without reasonable time and geographical limitations is unenforceable. Although New York generally disfavors an unreasonable non-competition covenant, there is an exception under the employee-choice doctrine. A recent Texas appellate court panel, applying Texas law, reversed a lower court order declaring valid under New York law an employment contract provision imposing a substantial penalty on a 30-plus year Exxon Mobil employee based in Texas who retired and then went to work for a competitor. Drennen v. Exxon Mobil Corp., No. 14-10-01099-CV (14th Tex. App., Feb. 14, 2012).

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