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LEGAL EASE
confidential information, or goodwill.
Employers often attempt to meet this requirement by promising
to give the employee trade secret information, other confidential in-
formation, or specialized training that impacts the employer’s good-
will. For example, the employer medical group promises to provide
you with access to certain trade secrets.
A problem, that is, lack of consideration, thus arises if the employer such as “within Bexar County.”
promises to provide access to confidential information and promises
to give specialized training, but never actually carries through with
providing it
This, of course, is highly fact specific. What did or didn’t your em-
ployer actually provide? Often, the employer provided nothing, thus
obviating the entire CNTC.
There’s another potentially interesting issue here that can arise in
the context of an addendum or amendment to a previous agreement.
Consider the following hypothetical:
The Jones Medical Group enters into an employment agreement
with Dr. Ecks. The agreement contains promises by the group to pro-
vide Dr. Ecks with confidential information and specialized training.
Dr. Ecks promises to keep any such information confidential. Three
weeks later, the group provides Ecks with a training session on the
Jones Technique, a breakthrough means of patient treatment.
A year passes, after which time Jones Medical Group presents Dr.
Ecks with an amendment to the employment agreement. The
amendment contains similar promises of providing confidential in-
formation and specialized training and now, for the first time, a
CNTC.
Another six months pass and no additional confidential informa-
tion reasonably related to protecting the group’s trade secrets or good-
will is actually provided. Has there been any consideration for the
CNTC thus rendering it enforceable if Dr. Ecks leaves the group and
joins a competitor across the street? Very arguably, the answer is “no;” ticular subspecialty for the Jones Medical Group. Let’s assume that
the CNTC has been blown.
Similarly, although not as clear, what if the medical group had
given Dr. Ecks confidential information a week after entry into the
amendment to the employment agreement. Was that delivery of the
separate consideration for the CNTC or was that delivery of infor-
mation that Jones Medical Group was already bound to deliver under
the terms of the original employment agreement? If it’s the latter,
then there was no separate consideration for the CNTC and it fails.
Unreasonable Time, Area, or Scope
In order for a CNTC to be enforceable, its restrictions must be
reasonable as to time, geographic area, and the scope of activity to
be restrained.
Additionally, the limitations placed on the physician by the CNTC
can’t impose a greater restraint than is necessary to protect the good-
will or other business interest of the employer.
Time restrictions are usually not an issue, because Texas courts have
enforced covenants that run from 1 year to 5 years or even longer.
However, geographic scope is a common problem area. For exam-
ple, it’s common in physician CNTCs to see restrictions that prohibit
competition with the business of the employer in a rather broad area,
Of course, the reasonableness of any geographic restriction turns
on the specific facts of your situation. But query whether a broad ge-
ographic restriction such as an entire county is either reasonable or
necessary to protect the business interests of an employer medical
group in the situation in which the medical group operates by way
of exclusive contracts at specific facilities only.
Is it reasonable to prevent a certain former employee physician,
say an anesthesiologist we’ll call Dr. Zee, who worked for the Jones
Medical Group at only one facility, St. Mark’s Community Hospital,
from later working for the Smith Medical Group at another hospital
10 miles away? What if Smith holds the exclusive contract at that
other facility, one at which the Jones Group cannot provide services
due to the grant of exclusivity to Smith?
In fact, depending on the physician’s medical specialty, it might be
held unreasonable to prevent Dr. Zee from working at any facility at
which he didn’t work for Jones.
To be readily enforceable, CNTCs should be tied to the specific
geographic area in which the physician provided services. Prohibi-
tions as to entire counties, for example, or to wide mile-radiuses such
as “22 miles from any facility served by Jones Medical Group” may
be attacked as over-broad. Similarly, CNTCs that effectively prevent
the physician from earning a living are overbroad and unenforceable.
Similarly, the scope of activity prohibited by the covenant is often
overbroad. Consider the issue of a physician practicing within a par-
the employment agreement contains a covenant not to compete that
prohibits the physician from any employment with a competitor in
the County. If the physician were, for example, a cardiac anesthesi-
ologist for Jones, can he be prohibited from practicing non-cardiac
anesthesia for the competing Smith Group?
In addition to, as mentioned above, the fact that the employer has
the burden to prove the reasonableness of a CNTC, under some cir-
cumstances surrounding overbroad restrictions, the employee may
be entitled to an award of attorneys’ fees even if the agreement with
the employer doesn’t contain an attorneys’ fees clause.
Blown Buy-Out Provision
To be enforceable, a physician CNTC must provide a right for the
physician to buy out of the covenant at a reasonable price or, at the
option of either party, as determined by a mutually agreed upon ar-
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