Attorney Blog, Human Resources

Fifth Circuit Issues More Guidance on Non-Compete Provisions

Attorney Harrison Oldham

Recently, the Fifth Circuit released an opinion, Brock Services, L.L.C. v. Richard Rogillio, No. 19-30363, which provides helpful guidance regarding non-compete provisions that can impact both employers and employees alike.

In Brock, Richard Rogillio (“Rogillio”) began working for Brock Services, L.L.C. (“Brock”) in the summer of 2010 until he resigned to work for a direct competitor, Apache Industrial Services, L.L.C. (“Apache”). At the time of his resignation in the fall of 2018, he was the Vice President of Operations for Brock’s Eastern Region. As part of his employment with Brock, Rogillio was subject to a non-compete provision in his employment agreement.

The non-compete provision prohibited Rogillio from working within a 100 mile radius of any actual, future, or prospective customer, supplier, licensor, or business location of Brock, that Rogillio conducted business in his capacity as an employee of Brock, within the last one year of Rogillio’s employment with Brock, either physically, via mail or via electronic mean, including, but not limited to, certain parishes of Louisiana and the municipalities of New Orleans (the “Restricted Area”).  In addition, the non-compete provision contained a severability clause that authorized a court to step in and revise any provision deemed to be overly broad.

As part of his new position, Rogillio managed Apache employees in at least some of the parishes listed in the employment agreement. He also met with Brock customers in some of the listed parishes.  Upon learning that Rogillio was managing Apache customers in some of the parishes in the defined Restricted Area, Brock filed suit against Rogillio to enforce the non-compete provision.

Brock sought a temporary restraining order and preliminary injunction. During the hearing on the motion, Brock conceded that portions of the non-compete provision were overbroad because it was not limited to specified parishes and municipalities, as required by Louisiana law.

With that in mind, by following the power provided in the severability clause of the employment agreement, the court reformatted and limited the non-compete clause’s definition of “Restricted Area.”   In doing so, the court narrowed the provision’s scope to only those parishes specifically listed in the agreement and removing catch-all clauses that went beyond the listed parishes.

Additionally, the district court found that the non-compete was ambiguous as to whether Rogillio had to be physically present in the Restricted Area to violate the employment agreement. To resolve this ambiguity, the district court permitted evidence of both sides’ intent and ultimately adopted the meaning set forth by Brock.

As a result, the district court enjoined Rogillio from “performing or managing any work, including by phone, over the Internet, or in person” in the restricted parishes for a brief period. Rogillio timely appealed.

On appeal, the Fifth Circuit ruled that the district court was right to modify the employment agreement and to factor in “parol” evidence about the parties’ intent to determine how the non-compete should be applied.

To support its argument in favor of bringing in parol evidence, Brock argued that general rules of contract interpretation still apply to restrictive covenants, and that parol evidence is permitted to interpret an ambiguous contract. The court agreed with Brock’s assertion, stating that “[a] noncompetition agreement is a contract between the parties who enter it, and it is to be construed according to the general rules of contract interpretation.”  When a contract is unambiguous, a court will look only to the four corners of the contract to interpret it, but, “when the terms of a written agreement are susceptible to more than one interpretation, or there is uncertainty or ambiguity as to its provisions, or the intent of the parties cannot be ascertained from the language employed, parol evidence is admissible to clarify the ambiguity or to show the intention of the parties.”

This holding not only underscores the importance of carefully crafting restrictive covenants in an employment agreement but creates a possibility that if a non-compete is found to be vague, then a court may be susceptible to hearing evidence of intent surrounding the non-compete.

About Harrison Oldham

Harrison grew up in Mansfield, Texas. He attended Texas A&M University for his bachelor’s degree, where he met his wonderful wife, Kelsey. After graduating magna cum laude from Texas A&M, he attended SMU Dedman School of Law, graduating with honors in 2012. Today, Harrison and his wife live in Dallas, Texas with their son, Teddy.

Since graduating from SMU Law, Harrison has worked exclusively in the field of business law. He has spent time in private practice and in-house, working with clients of every size; from single person startups to Fortune 250 companies. Today his practice focuses on serving the diverse needs of businesses and individuals throughout Texas. You can learn more about Harrison by visiting his website, at: http://lonestarbusinesslaw.com/.

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