Austin Business Sued for Allegedly Violating Non-Compete

January 13, 2011

When companies draft employment contracts, or agreements for the purchase and sales of businesses, they often include non-compete clauses. These covenants not to compete generally say that the employee or seller of the business agrees not to work within a particular field, in a specified geographic area, for a certain period of time.

In the current economic climate, many people are concerned with just finding a job or selling their business in these uncertain times; these parties may not consider the gravity of agreeing to a non-compete clause. Often times, the consequences of a non-compete clause can be serious, and such non-compete disputes are often decided by the precise wording used in the employment contract or purchase and sales agreement.

Houston's SouthWaste Disposal v. Austin's JM Waste Tech

To take just one case for example, a two-person Austin-based company called JM Waste Tech, which specializes in septic tank pumping, is currently being sued by Houston-based SouthWaste Disposal LLC. Like JM, SouthWaste also also handles liquid wastes, but focuses their business on pumping so-called "brown grease" from restaurant grease traps.

A recent article in the Austin Business Journal explains that the judge in the case has issued a temporary restraining order, preventing JM from competing with SouthWaste, according to the terms of a non-compete clause from 2005. While the details of the case were not reported, there are presumably two scenarios that may have formed the non-compete.

The first possibility could be that the founder of JM used to work for SouthWaste. SouthWaste would now be alleging that the former employee's business is competing with Southwaste, in violation of its employment contract.

In the other scenario, the two entities may have entered into an agreement for the purchase and sale of a waste disposal business. When negotiating the purchase and sales of businesses, the parties typically agree to some form of a covenant not to compete.

Regardless of the underlying facts in the JM Waste litigation, the resolution could likely turn on the words used in the non-compete clause regarding:
- the geographic area,
- the sort of work performed (pumping residential septic tanks versus restaurant grease traps), or
- the time period covered by the agreement.

Drafting, Enforcing or Defending Non-Compete Clauses

When drafting non-compete clauses--or any aspect of an employment or sales contract--it's important that the writer has a solid grasp on business law and litigation to avoid pitfalls that could surface years later. Whether the issue is drafting the agreement, assessing the validity of an existing agreement, or defending the company in court, a company is well-served to hire an Austin business attorney with both a litigation and transactional law background.

Article provided by John McDuff Attorney at Law
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