Houston’s Fourteenth Court of Appeals recently held that a claim for attorney’s fees under the Uniform Declaratory Judgments Act (“UDJA”) is not preempted by the Texas Covenants Not to Compete Act where the action brought under the UDJA seeks to declare a covenant not to compete unenforceable.

In Traina v. Hargrove & Associates Inc. a former employee filed suit against his former employer seeking a declaratory judgment that a covenant not to compete he entered into with his employer is unenforceable.  The trial court granted summary judgment in favor of the employer that the employment agreement was enforceable, reformed the covenant to limit the scope of restrictions, and declined to award attorney’s fees under the UDJA.  The trial court’s ruling stated that fees under the UDJA were preempted by the Covenants Not to Compete Act.

After affirming the trial court’s determination of the enforceability of the covenant, the court of appeals determined that since the employee’s UDJA claim sought to declare the covenant unenforceable, his claim for attorney’s fees was not preempted.  The court noted: “The only claim brought in this case is Traina’s claim for a declaration that the covenant is unenforceable.  Under such circumstances, this case does not qualify as “an action to enforce a covenant not to compete” under the plain meaning of the statute.” (emphasis own).  The court concludes that since there was no claim to enforce the covenant not to compete, UDJA attorney’s fees are not preempted by section 15.52 of the Business and Commerce Code.  The court remanded the proceedings to determine the issue of whether the former employee is entitled to attorney’s fees.Continue Reading Houston Appeals Court Reminds Employers Why They Should Review the Enforceability of Their Non-Compete Agreements with Employees