Who Pays for a Noncompete Declaratory Action Lawsuit in Texas?
In the state of Texas, a noncompete declaratory action lawsuit is a type of legal action in which a court is asked to determine the enforceability of a noncompete agreement. These agreements, also known as noncompetition clauses, are commonly used by employers to prevent employees from taking a job with a competing company for a certain period of time after leaving their current job.
WHY DOES NO ONE KNOWS YOU COULD DO THIS?
From my experience, most employees in Texas and many employers think noncompete lawsuits only goes one direction: a big employer is suing the pants off a former employee. Many departing executives and former employees are surprised when I tell them that they can sue their former employer for trying to enforce an unfair noncompete. Yes, sometimes it’s a race to the courthouse.
In a noncompete declaratory action lawsuit filed by an employee, the court will consider the specific terms of the noncompete agreement and determine whether it is enforceable under Texas law. If the court finds that the agreement is enforceable, the employee will be prohibited from taking a job with a competing company. If the court finds that the agreement is not enforceable, the employee will be free to take a new job without any restrictions.
Who pays for a noncompete declaratory action lawsuit in Texas?
The answer is that it depends on the specific circumstances of the case. Texas Courts have to follow the Texas law when it comes to the award of attorney’s fees to a prevailing party. The award of attorney’s fees depends on who wins the noncompete lawsuit and what part of the lawsuit they won.
In some cases, the employer may be required to pay the employee’s legal fees if the court finds that the noncompete agreement is not enforceable. This is because Texas law allows for the recovery of attorney’s fees in certain circumstances, such as when an employer seeks to enforce an unenforceable noncompete agreement.
Here’s another example, what if the employer sues an employee to enforce a noncompete and the court determines that the agreement is not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the employer? What happens then? Well, if the employee’s lawyer does a good job in legal arguments, the court may reform the noncompete and make the restrictions more reasonable but still protect the goodwill or other business interest of the employer. In that situation, the employer gets a win for being able to enforce a reformed noncompete contract. However, Texas laws says the court may not award the employer legal fees a breach of the covenant lawsuit before the court reformed the noncompete.
However, in other cases, the employee may be required to pay their own legal fees, even if the court finds that the noncompete agreement is not enforceable. This is because the recovery of attorney’s fees is not always automatic in Texas, and it may depend on the specific facts of the case.
Overall, the issue of who pays for a noncompete declaratory action lawsuit in Texas is complex and can vary depending on the specific circumstances of the case. It is important for both employers and employees to carefully consider the potential costs and implications of these lawsuits and to seek legal advice if necessary.