By:  Carona                                              H.B. No. 7
       73R631 LJD-F
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to covenants not to compete.
    1-3        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-4        SECTION 1.  Section 15.50, Business & Commerce Code, is
    1-5  amended to read as follows:
    1-6        Sec. 15.50.  Criteria for Enforceability of Covenants Not To
    1-7  Compete.  (a)  Notwithstanding Section 15.05 of this code, a
    1-8  covenant not to compete is enforceable to the extent that it:
    1-9              (1)  is ancillary to an otherwise valid transaction or
   1-10  relationship <enforceable agreement> but, if the covenant not to
   1-11  compete is executed on a date other than the date on which the
   1-12  transaction occurs or the relationship begins <underlying agreement
   1-13  is executed>, such covenant must be supported by independent
   1-14  valuable consideration; and
   1-15              (2)  contains reasonable limitations as to time,
   1-16  geographical area, and scope of activity to be restrained that do
   1-17  not impose a greater restraint than is necessary to protect the
   1-18  goodwill or other business interest of the promisee.
   1-19        (b)  For purposes of Subdivision (1) of Subsection (a) of
   1-20  this section, continued employment or the promise of continued
   1-21  employment, of definite or indefinite duration, constitutes
   1-22  sufficient independent valuable consideration.
   1-23        SECTION 2.  Sections 15.51(b) and (c), Business & Commerce
   1-24  Code, are amended to read as follows:
    2-1        (b)  If the primary purpose of the transaction or
    2-2  relationship <agreement> to which the covenant is ancillary is to
    2-3  obligate the promisor to render personal services, the promisee has
    2-4  the burden of establishing that the covenant meets the criteria
    2-5  specified by Subdivision (2) of Section 15.50(a) <15.50> of this
    2-6  code.  If the transaction or relationship <agreement> has a
    2-7  different primary purpose, the promisor has the burden of
    2-8  establishing that the covenant does not meet those criteria.  For
    2-9  the purposes of this subsection, the "burden of establishing" a
   2-10  fact means the burden of persuading the triers of fact that the
   2-11  existence of the fact is more probable than its nonexistence.
   2-12        (c)  If the covenant meets the criteria specified by
   2-13  Subdivision (1) of Section 15.50(a) <15.50> of this code but does
   2-14  not meet the criteria specified by Subdivision (2) of Section
   2-15  15.50(a) <15.50>, the court, at the request of the promisee, shall
   2-16  reform the covenant to the extent necessary to cause the covenant
   2-17  to meet the criteria specified by Subdivision (2) of Section
   2-18  15.50(a) <15.50> and enforce the covenant as reformed, except that
   2-19  the court may not award the promisee damages for a breach of the
   2-20  covenant before its reformation and the relief granted to the
   2-21  promisee shall be limited to injunctive relief.  If the primary
   2-22  purpose of the transaction or relationship <agreement> to which the
   2-23  covenant is ancillary is to obligate the promisor to render
   2-24  personal services, the promisor establishes that the promisee knew
   2-25  at the time of the execution of the covenant <agreement> that the
   2-26  covenant did not meet the criteria specified by Subdivision (2) of
   2-27  Section 15.50(a) <15.50> and the promisee sought to enforce the
    3-1  covenant to a greater extent than was necessary to protect the
    3-2  goodwill or other business interest of the promisee, the court may
    3-3  award the promisor the costs, including reasonable attorney's fees,
    3-4  actually and reasonably incurred by the promisor in defending the
    3-5  action to enforce the covenant.
    3-6        SECTION 3.  This Act applies to a covenant entered into
    3-7  before, on, or after the effective date of this Act.
    3-8        SECTION 4.  The importance of this legislation and the
    3-9  crowded condition of the calendars in both houses create an
   3-10  emergency and an imperative public necessity that the
   3-11  constitutional rule requiring bills to be read on three several
   3-12  days in each house be suspended, and this rule is hereby suspended,
   3-13  and that this Act take effect and be in force from and after its
   3-14  passage, and it is so enacted.