Court Broadens Geographic Scope of Agreement

Chris Hanslik

September 15, 2009

In Vaughn v. Intrepid Directional Drilling Specialists, Ltd. a Texas court of appeals considered whether an employee violated a covenant not to compete by arranging for his own newly-formed company to provide services on a project outside the geographic zone covered by the covenant. The covenant stated that the employee could not interfere “directly or indirectly, in any manner with any relationship between [the employer and] customers within the Restricted Territory.” In upholding the injunction against the employee, the court ruled the provision could reasonably be interpreted to prohibit the employee from serving a customer located in the restricted territory even if the work in question was outside the protected territory.

This ruling provides employers with an advantage when trying to enforce non-compete clauses against former employees by expanding the geographic scope beyond the written terms of the agreement.