GEC S.B. 885 75(R)BILL ANALYSIS


BUSINESS & INDUSTRY
S.B. 885
By: Carona (Thompson)
5-9-97
Committee Report (Unamended)

BACKGROUND 

Currently, the need may arise in the context of a sale of a business or in
post-employment relations for involved parties or persons to agree to
refrain from competing with each other in order to protect the continuing
viability of the business.  In these cases a covenant is established which
attempts to restrict a party from competing in some activity for a period
of time in a particular geographical area.  
In order for a covenant to be enforceable it must meet a variety of
standards established by statute. This bill establishes certain criteria
under which a  covenant is enforceable. 

PURPOSE

As proposed, S.B. 885 establishes certain criteria under which a covenant
is enforceable. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 15.50, Business & Commerce Code, as follows:

Sec.  15.50.  New heading:  CRITERIA FOR ENFORCEABILITY OF COVENANTS NOT
TO COMPETE; CONSIDERATION.  Provides that a covenant not to compete is an
enforceable agreement if it is ancillary to or part of an otherwise
enforceable agreement or otherwise valid transaction or relationship,
rather than at the time the agreement is made, to the extent that it
contains limitations as to time, geographical area, and scope of activity
that are reasonable and do not impose a restraint greater than is
necessary to protect the goodwill or other business interest of the
promisee.  Requires certain covenants to be supported by consideration
other than the continuation of the agreement, transaction, or
relationship. 

SECTION 2. Effective date:  September 1, 1997.

SECTION 3. Emergency clause.