Texas employers recently got a win when a state appellate court held that a contract provision giving an employee the option of receiving a benefit by not competing with their employer is not a true “non-compete agreement.” The August 6 decision in Healing Hearts Clinic v. Ramineni means that contracts that give employees a financial incentive not to compete don’t have to meet the reasonableness requirements that generally apply to non-competes in the state. This ruling clears the way for Texas employers to use such “forfeiture provisions” as a carrot rather than having to resort to the stick of a true non-compete when it comes to protecting your business. What are the five things you need to know about this key decision?
The Nature of the Contract Provision at Issue
Rajesh Ramineni was a physician who alleged that his Texas employer – Healing Hearts Clinic – failed to pay 50% of his accounts receivable following his resignation and sale of his shares. The shareholder agreement at issue contained a provision allowing for the additional payment if the employee retired from the active practice of cardiology or continued to practice cardiology outside a 20-mile radius of his employer’s principal office. The additional payment would be made approximately one year and 30 days after the employee gave notice (assuming he complied with the non-compete).
Ramineni was also bound by a...
To display this content from YouTube, you must enable advertisement tracking and audience measurement. 2 min Antoine, a 26-year-old who volunteers as a "street medic" to provide first aid to injur...