Noncompete agreements generally must include reasonable geographical limitations. To determine whether geographical limitations are reasonable, employers need to look at a number of factors including their business and the role of the employee entering the noncompete agreement.
Noncompete Agreement Case Study
In Cobb v. Caye Publishing Group, the parties entered a noncompete agreement that failed to include any geographical limitations. The Fort Worth Court of Appeals analyzed whether the trial court imposed proper geographical limitations in reforming the noncompete agreement.
Cobb, an independent contractor, agreed not to work for a competing publishing company or start a publication the same as he was selling for Caye Publishing if he left. Cobb eventually resigned and began publishing and distributing a similar publication outside of where he worked for Caye Publishing. Caye Publishing sued Cobb and obtained a temporary injunction preventing Cobb from distributing a competing publication in Johnson County and the cities of Aledo and Weatherford. Cobb appealed contending, in part, the temporary injunction’s geographical limitations were too broad.
The court of appeals first noted a reasonable area restriction in a noncompete generally includes where the employee worked. Cobb worked in Johnson County, only. Caye Publishing contended Aledo and Weatherford were appropriate restrictions since it intended to expand to those cities.
The court of appeals noted no case previously held an area targeted for future expansion alone was a reasonable restriction. It then observed, as a result of not entering those markets, including no substantive preparations, Caye Publishing possessed no customer goodwill to protect. Therefore, the court of appeals dissolved the temporary injunction as to Aledo and Weatherford.
The case is an important reminder to employers to focus on including supportable restrictions in any noncompete. Furthermore, the noncompetes should focus on protecting legitimate business interests.