Unreported / Non-Citable
Background
Jennifer Jacks worked for approximately seven months as a salesperson in CSC Serviceworks, Inc.’s Appliance Warehouse division, which sells and leases laundry products to multifamily residences. She later joined Precision, which CSC characterized as a direct competitor. After CSC sent her a cease-and-desist letter alleging that the new employment violated her noncompete agreement, Jacks resigned from Precision.
Jacks sued for declaratory relief and moved to preliminarily enjoin CSC from enforcing the noncompete as written. After an evidentiary hearing, CSC asserted a breach-of-contract claim and sought its own preliminary injunction barring Jacks from working for Precision or another competitor in violation of the covenant. Although the agreement selected Florida law, both parties argued under Texas law and did not dispute its application, so the court applied Texas law.
The Court’s Holding
The court held that the noncompete was overbroad and unenforceable as written. Although its two-year duration was reasonable, its territorial restriction extended beyond Jacks’s assigned sales territory based on possible contacts at industry events and possible work in other areas. Its activity restriction also effectively excluded her from the laundry sales and leasing industry throughout greater Houston, including work involving customers with whom she had no dealings at CSC.
Applying Texas law, the court tentatively reformed the covenant to cover only territories specifically assigned to Jacks and within her sales territory. It further limited the restriction to work for a competing business within that territory involving customers with whom she worked at CSC, while permitting employment by a competitor so long as she does not work in the restricted territory.
The court nevertheless denied both preliminary-injunction requests. Jacks showed a substantial likelihood of success on her challenge to the original covenant, but she did not establish irreparable harm, a favorable balance of harms, or consistency with the public interest; lost wages and employment could be remedied with damages. CSC lacked a likelihood of success on the merits under the original overbroad covenant and also failed to show irreparable injury or satisfy the remaining equitable factors. Either party may seek future injunctive relief if the reformed covenant is breached.
Key Takeaways
- A Texas noncompete may be unenforceable when it reaches territories and customers with whom the employee did not actually work or functions as an industry-wide employment ban.
- Texas law required the court to reform the unreasonable covenant even though the court denied preliminary relief to both sides.
- Likely success on the merits alone did not entitle Jacks to an injunction, and CSC’s size and available damages undercut its claim of irreparable harm.
Why It Matters
The decision illustrates that a nominal geographic limitation will not save a noncompete if the employer interprets it expansively enough to reach undefined customers and places outside the employee’s actual responsibilities. Restrictions tied to assigned territory and customers personally served are more likely to survive scrutiny than broad bans on working for industry competitors.
It also underscores the distinction between reforming a covenant and immediately enforcing it through an injunction. Even after narrowing an overbroad restriction, a court will require the party seeking preliminary relief to independently prove irreparable harm, the balance of harms, and the public-interest element.